In my morning forecast, I paid attention to the level of 1.2171 and recommended making decisions from it. Let's look at the 5-minute chart and figure out what happened there. An attempt to break through 1.2171 in the first half of the day was unsuccessful, which led to the formation of a false breakdown and a signal to buy the pound. After moving up by 20 points, the pressure on the pair returned, and the bears tested 1.2171 once again, forming a larger downward movement under this level. At the time of writing, the bulls again pulled GBP/USD above 1.2171, which led to a revision of the technical picture for the second half of the day. And what were the entry points for the euro?
To open long positions on GBP/USD, you need:
The mood of buyers of the British pound is getting worse and worse. Recent data showed another increase in prices – now for fresh food, where, by analogy with June last year, the jump was 6.0%. Now millions of low-income households are in a more difficult situation than before. Boris Johnson's recent statements that he does not plan to support the abolition of the corporate tax increase next year only complicate the situation. The Bank of England's firm stance on interest rates will lead to higher borrowing costs, which will push the economy even further into recession. Against this background, I consider the further growth of the pound to be very limited. During the American session, data on US GDP for the first quarter of this year are released today – the final estimate, as well as statements, will be made by Fed Chairman Jerome Powell and FOMC member James Bullard. For sure, politicians will continue to "torment" the issue of inflation and interest rates, which may support the dollar in the afternoon. In the case of a decline in the pound, only the formation of a false breakdown in the area of the new support of 1.2162 will give a signal to open long positions in the expectation of growth to the nearest level of 1.2240, where the moving averages are playing on the side of sellers. A breakout and a top-down test of 1.2240 forms a buy signal, which will lead to an increase in long positions and a return to 1.2317 - the upper limit of the side channel, above which it has not been possible to get out for more than a week. A similar breakthrough at this level will lead to another entry point into long positions with the prospect of reaching 1.2400, where I recommend fixing the profits. A more distant target will be the 1.2452 area. If GBP/USD falls and there are no buyers at 1.2162 in the afternoon, the pressure on the pair will increase. In this scenario, I advise you to postpone purchases until a larger decline in the pound. You can open new long positions only on a false breakout from 1.2094. I advise buying GBP/USD immediately for a rebound from 1.2030, or even lower – around 1.1938 with a view to a correction of 30-35 points within a day.
To open short positions on GBP/USD, you need:
Bears have done everything possible to return to the market and are now actively fighting for 1.2162. However, in the case of weak US data, it will be possible to observe the pound's upward jerk. Therefore, only the formation of a false breakdown at 1.2240 will lead to the formation of a sell signal with the prospect of a return to 1.2162. If the bears do not postpone everything, then a breakthrough and a reverse test of 1.2162 will lead to a larger sell-off and a drop in GBP/USD to the area of 1.2094, which will completely negate the prospects for further bullish trend building. Fixing below 1.2094 and a reverse test from the bottom up will give an additional entry point into short positions with a longer-range target of 1.2030, where I recommend fixing the profits. With the option of GBP/USD growth and the absence of bears at 1.2240, we will only have to count on the nearest resistance of 1.2317. A false breakout at this level will give a good entry point into short positions in the expectation of at least some downward correction. If there is no activity at 1.2317, another upward jerk may occur against the background of the demolition of stop orders of speculative sellers. In this case, I advise you to postpone short positions to 1.2400. I advise you to sell the pound there only if there is a false breakdown. Short positions can be viewed immediately for a rebound from 1.2452, or even higher – from 1.2482, counting on the pair's rebound down by 30-35 points inside the day.
The COT report (Commitment of Traders) for June 21 recorded a reduction in both long and short positions, but the latter turned out to be more, which led to a slight decrease in the negative delta. Last week, inflation data in the UK confirmed the correctness of the Bank of England's position on monetary policy. The sharp inflationary jump in May of this year was nothing surprising for traders since even according to the official forecasts of the regulator, the consumer price index will exceed the mark of 11.0% by the end of the year. The big players, of course, took advantage of the moment and increased their long positions as a result of another collapse of the pound, but now, according to the report, we see that fewer people are willing to sell at current lows, which plays on the side of the British pound. The policy of the Federal Reserve System and its rate of interest rate increases will not surprise anyone, so it's time to think about buying cheaper risky assets. The COT report indicates that long non-commercial positions decreased by only 873 to the level of 28,470, while short non-commercial positions decreased by 3,222 to the level of 91,717. This led to a decrease in the negative value of the non-commercial net position from the level of -65,596 to the level of -63,247. The weekly closing price rose to 1.2295 against 1.1991.
Signals of indicators:Moving averagesTrading is conducted below 30 and 50 daily moving averages, which indicates a likely continuation of the fall of the pound.Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.Bollinger BandsA break of the lower limit of the indicator in the area of 1.2160 will increase the pressure on 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 use the futures market for speculative purposes and to 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 the short and long positions of non-commercial traders.