To open long positions on GBP/USD, you need:
The British pound compensated for all the decline that could be seen on Thursday. As a result, a lot of signals to enter the market were generated. Let's take a look at the 5-minute chart and break down all the entry points. Even in my afternoon forecast, I drew attention to the formation of entry points into long positions from the level of 1.3796. The formation of a false breakout in this range allowed the bulls to prove their presence in the market, after which there was a rapid rise to the high of 1.3832. The formation of a false breakout there seemed to have resulted in short positions on the pound, however, the removal of stop orders continued the bullish trend. Consolidating at 1.3832, as well as at 1.3854 has resulted in creating entry points into long positions. Today, economically, the calendar for the UK is empty, so we can count on the continuation of the upward trend in the British pound. However, it will not be so easy to get out of the resistance at 1.3871. For a start, the bulls need to work hard to maintain the level of 1.3837. Forming a false breakout there generates a signal to open long positions in hopes of an upward correction to the resistance of 1.3871. There are moving averages playing on the side of the bulls around 1.3837, so this is an additional plus for the bulls. The breakthrough and test of 1.3871 from top to bottom, which was not done last Friday can create another signal to buy the pound, counting on a return to 1.3904, the test of which will mean a reversal of the downward trend. The next target will still be the 1.3926 high, where I recommend taking profits. If the pressure on the pound returns, and the bulls show nothing in the support area of 1.3837, the optimal scenario will be long positions from 1.3815, but only after a false breakout is formed. It is possible to buy GBP/USD immediately on a rebound around 1.3792, counting on an upward correction of 15-20 points within the day.
To open short positions on GBP/USD, you need:
The initial task of the bears is to protect the resistance at 1.3871, as it has not broken through above it last Friday, and in general, this range is important for both the bears and the bulls. The optimal scenario for opening short positions will be a false breakout at 1.3871, which will return pressure to the pound and generate a signal to open short positions in order to pull down the pair to a low like 1.3837, for which a fierce struggle will also unfold. A breakthrough of this area could bring serious pressure back to the pound. The test of 1.3837 from the bottom up will push GBP/USD even lower - to 1.3815, and there it is a stone's throw to last week's low - 1.3792, where I recommend taking profit. The next target will be the 1.3768 low. If the bears are not active around 1.3871, I advise you to postpone selling until the next major resistance at 1.3904. I also recommend opening short positions from there only if a false breakout is formed. Selling GBP/USD immediately on a rebound is possible from the local high in the 1.3926 area, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) reports for August 3 showed a reduction in short positions, and a sharp rise in long ones. All this is explained by the results of the Bank of England meeting, where representatives again started talking that in the near future the attitude to monetary policy will change towards tightening. This brought back the demand for the British pound that slept all week, which made it possible to change the balance of power in the net position. The panic after the lifting of all quarantine restrictions in the UK has also receded, which allows the economy to continue to breathe deeply. There is little pressure on the pound right now, but it is mainly due to the strong performance in the US economy and labor market. However, I advise you to stick to the strategy of buying the pound every time it significantly drops, as the big players do. The COT report indicated that long non-commercial positions rose 41,194 to 43,119, while short non-commercial positions fell from 46,878 to 43,205, indicating continued buying from major players. As a result, the non-commercial net position remained negative and amounted to -86 against -5,684 a week earlier. Last week's closing price jumped from 1.3826 to 1.3891.
Indicator signals:
Trading is carried out just above the 30 and 50 moving averages, which indicates the sideways nature of the market.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
Growth will be limited by the upper level of the indicator in the area of 1.3871. In case of a decline, support will be provided by the lower border of the indicator in the area of 1.3825.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain 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 short and long positions of non-commercial traders.
