To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to several upcoming levels. However, it was not possible to achieve their goal. Let's look at the 5-minute chart and figure out what happened. Too low volatility after yesterday's meeting of the Bank of England on monetary policy did not allow the formation of signals for entering the market today in the first half of the day. The focus will be shifted to the second half of the day and to reports on the US labor market, where the pair will exit from a narrow sideways range. From a technical point of view, nothing has changed. The prospects for the growth of the British pound remain quite good. However, it is necessary to wait for reports on the American labor market, which will set the market's direction today. If the indicators turn out to be much better than economists' forecasts, the British pound's fall will be ensured. In this case, the bulls need to try to protect the support of 1.3907, which acts as the middle of the side channel or concentrate on protecting this week's low of 1.3874, from which I also recommend opening long positions only if a false breakdown is formed. If there is no activity of buyers in these ranges, the best solution is to take long positions immediately to rebound from the larger support of 1.3846. If the US labor market data turns out to be worse than economists' forecasts, it is a signal to buy the pound. In this case, the bulls will focus on the breakdown of the resistance of 1.3944, the reverse test of which from top to bottom forms a new entry point into long positions to continue the upward trend to the area of the last month's maximum of 1.3978. A breakout of this level will also lead to an update of new local resistances of 1.4059 and 1.4097, where I recommend fixing the profits.
To open short positions on GBP/USD, you need:
The initial task of the bears remains to protect the resistance of 1.3944. A lot will depend on the market's reaction to the data on the number of people employed in the non-agricultural sector of the United States. The formation of a false breakdown will return pressure on the pound, which will form the first signal to open short positions, expecting a decline in the pair to the middle of the side channel 1.3907. A breakdown of this level with a reverse test from the bottom up will push GBP/USD to the lower border of the channel of 1.3874, going beyond which will disrupt the entire market balance and hit the bulls' stop orders. Such a scenario will push the pound even lower to the supports of 1.3846 and 1.3807, where it is worth thinking about profit-taking. The area of 1.3768 remains a longer-range target. In the absence of active actions of sellers in the area of 1.3944, I advise you to postpone sales until the next major resistance of 1.3978, which acts as the maximum of the previous month. I also recommend opening short positions from there only if a false breakdown is formed. You can sell GBP/USD immediately on a rebound from a new local maximum in the area of 1.4059, counting on a downward correction of 25-30 points within the day.
The COT reports (Commitment of Traders) for July 27 recorded a reduction in long positions. However, sellers also did not insist and partially reduced their volume of positions. The growth of the pound throughout the week allowed the GBPUSD pair to return to monthly highs. However, it was not possible to gain a foothold higher. The panic after lifting all quarantine restrictions in the UK has receded, and now the main focus this week will be placed at the meeting of the Bank of England on monetary policy. The European Central Bank and the Federal Reserve System did not change anything. Most likely, the Bank of England will also do the same. Before abandoning the stimulus measures, the Bank of England committee members will surely wait for accurate data on how things are going on in the labor market. It is expected that a large-scale government program to support the labor market will be completed as early as September of this year. It may force the regulator to take a longer wait-and-see position since the central bank is not experiencing any special problems with inflationary pressure yet. If the Bank of England representatives start talking more about plans to reduce the bond purchase program, this will provide significant support to the pound. I advise you to stick to the strategy of buying the pair with each significant decrease in it, as the big players do. The COT report indicates that long non-commercial positions decreased from 44,223 to the level of 41,194.
In contrast, short non-commercial positions decreased from the level of 47,720 to the level of 46,878, indicating a cautious approach to sales at current highs. As a result, the non-commercial net position remained negative and amounted to -5,684 against -3,496 a week earlier. The closing price of last week jumped from the level of 1.3668 to 1.3826.
Signals of indicators:
Moving averages
Trading is conducted around 30 and 50 daily averages, which indicates the sideways nature of the market before important data.
Note: The author considers the period and prices of moving averages on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
A break of the lower limit of the indicator in the area of 1.3907 will lead to a fall in the pound. A break of the upper limit of the indicator in the area of 1.3935 will lead to a new wave of growth of the pair.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between the short and long positions of non-commercial traders.
