There were a lot of market entry signals yesterday, but not all of them were profitable. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 1.1743 level in my morning forecast and advised making decisions from it. Seemingly a great breakthrough with a reverse test from below the level of 1.1743 could lead to a sell signal with a further decline in GBP/USD along the trend, but it turned out a little differently. Good performance in the services sector in the UK helped the pound to rebound from annual lows. As a result, we had to take losses from waiting for forming a false breakout at 1.1782. The entry from this signal brought about 30 points of profit and made it possible to compensate for the losses. The pound rose in the afternoon, after a rather bad report on activity in the US economy, and a false breakout at 1.1865 gave a sell signal with a move down by more than 45 points. The bulls immediately caught on and defended the support at 1.1820 – a buy signal and a move in the opposite direction by 45 points to 1.1865. There, the bears again used all their strength and having formed a signal to sell, they achieved a rollback of the pound down by 30 points.
When to go long on GBP/USD:
Today there are no fundamental statistics on the UK at all, so it is difficult to say what bulls will be able to use to continue the pair's growth - although there are all chances for this. If the bulls manage to form a false breakout at 1.1796 in the first half of the day, where the moving averages are, this will provide a buy signal and a chance for an upward correction to continue with a return to 1.1833. A breakthrough and a downward test of this range will testify to the succeeding growth of GBP/USD and lead to profit taking with a signal for long positions and growth to a more distant level of 1.1874, where I recommend taking profit.
If the GBP/USD falls and there are no bulls at 1.1796, the pressure on the pair will increase. In this case, I advise you to postpone long positions until the next support at 1.1760. You can buy there only on a false breakout. I recommend opening longs on GBP/USD immediately for a rebound from 1.1720, or even lower - around 1.1684, counting on correcting 30-35 points within the day.
When to go short on GBP/USD:
Bears received a notable "blow in the gut" yesterday, but so far they are holding the line. Today's lack of statistics will rather benefit them, not the bulls. The optimal scenario for short positions would be forming a false breakout in the resistance area of 1.1833, formed on the basis of yesterday. This will allow us to return to the intermediate support at 1.1796, where the moving averages are passing and for which a more active struggle will already unfold. A breakdown and reverse test of this range will provide an entry point for selling with a fall to 1.1760 and cross out all of the bulls' efforts from yesterday to build an upward correction of the pair. A more distant target will be the area of 1.1720, where I recommend taking profits.
In case GBP/USD grows and there are no bears at 1.1833, the chances of a larger upside correction would increase significantly, and bulls would have a great opportunity to return to 1.1874. Only a false breakout there will provide an entry point into short positions based on the pair moving down. If traders are not active there, I advise you to sell GBP/USD immediately for a rebound from 1.1921, counting on the pair's rebound down by 30-35 points within the day.
COT report:
According to the Commitment of Traders (COT) report from August 16, both short positions and long positions increased, but these changes no longer reflect the real current picture. Serious pressure on the pair, which began in the middle of last week, continues now, and for sure those who want to buy the pound in the current difficult macroeconomic conditions will become less and less. Ahead of us is a meeting of American bankers in Jackson Hole, which may lead to even greater strengthening of the dollar against the pound. This will happen on the condition that Federal Reserve Chairman Jerome Powell announces the preservation of the committee's previous position regarding the active and tough increase in interest rates, counting on the further fight against inflation and bringing it back to normal. The latest COT report indicated that long non-commercial positions rose 1,865 to 44,084, while short non-commercial positions rose 506 to 77,193, further narrowing the negative non-commercial net position to -33,109 versus -34,468. The weekly closing price remained virtually unchanged at 1.2096 versus 1.2078.
Indicator signals:
Moving averages
Trading is conducted above the 30 and 50-day moving averages, which indicates the bulls' attempt to continue the correction.
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
In case of growth, the area of 1.1874 will act as resistance. In case the pair goes down, the lower border of the indicator around 1.1760 will act as support.
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.
