In my morning forecast, I drew attention to the level of 1.2460 and recommended making decisions from there on entering the market. Let's look at the 5-minute chart and figure out what happened there. The breakout and the bottom-up retest of this range led to an excellent sell signal, which resulted in a downward movement of more than 30 points. The technical picture was partially reviewed for the second half of the day.
For opening long positions on GBP/USD, it's required:
The speech of the Governor of the Bank of England, Andrew Bailey, negatively affected the pound's position, which nearly reached the renewal of weekly lows when paired with the US dollar. In the second half of the day, pressure on the pair will increase if it becomes clear that the weekly number of initial claims for unemployment benefits in the US has reduced again and housing sales in the secondary market have grown. Good numbers will return the pressure on the pound, leading to a decrease in the pair and a retest of 1.2414 - a new support level that was reviewed for the second half of the day. Therefore, only with the formation of a false breakout will there be a sufficient reason for a buy signal with the prospect of recovery in the area of 1.2456, but then you can forget about a larger upward movement. Only a fixation above this range and a top-down retest will form an additional buy signal with a jump to 1.2491, where the moving averages pass. The furthest target will be the area of 1.2533, where I will fix the profit.
In the case of a decline to around 1.2414 and a complete lack of buyer activity in the second half of the day, I will postpone purchases until the next monthly minimum of 1.2385 is updated. I will also open long positions there only on a false breakout. I plan to buy GBP/USD directly on a rebound only from the minimum of 1.2353, aiming to correct 30–35 points within the day.
For opening short positions on GBP/USD, it's required:
Sellers showed themselves already in the first half of the day, as despite all the positive expectations of the Bank of England regarding the economy, nothing good is happening in the short term. The demand for the dollar as a safe-haven asset remains quite high amid uncertainty caused by the political situation with the US public debt. However, despite the fall in the pair, a repeat of yesterday, when the bulls were active throughout the American session, should be considered. Still, the US real estate market condition data needs to be very poor for this.
An attractive selling scenario would be a false breakout at 1.2456 - a resistance formed by the results of the first half of the day. In this case, the target for bears would be to create new pressure on GBP/USD, counting on a decline to the 1.2414 level. A breakthrough and a reverse test from the bottom to the top of this range will intensify pressure on the pair, forming a sell signal with a fall to 1.2385. The farthest target remains at a minimum of 1.2353, where I plan to fix the profit.
Regarding GBP/USD growth and lack of activity at 1.2456, I will postpone sales until the resistance test at 1.2491, where the moving averages pass. Only a false breakout there will provide an entry point into short positions. If there is no downward movement, I will sell GBP/USD on a bounce right from 1.2533, but only with the expectation of a pair correction downwards by 30-35 points within the day.
The COT (Commitment of Traders) report for May 9 showed a growth of long and short positions. Although the Bank of England's decision to raise interest rates is not yet reflected in these data, the active build-up of long positions is evidence of the presence in the market of those wishing to buy the pound even at current levels. Given that it corrected quite well at the end of last week, this will create additional demand for the trading instrument. The latest COT report states that non-commercial short positions increased by 12,900 to 71,561, while non-commercial long positions jumped by 9,437 to 9,437. This led to an increase in the non-commercial net position to 4,528 against 1,065 a week earlier. Growth resumed after a slight decrease, which will positively affect the pound in the future. The weekly price increased and was 1.2635 against 1.2481.
Indicator signals:
Moving averages
Trading is carried out below the 30- and 50-day moving averages, which indicates a further decline of the pair.
Note: The author considers the period and prices of the moving averages on the H1 hourly chart and differs from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands
In the case of growth, the upper border of the indicator at around 1.2510 will act as a resistance.
Indicator descriptions
• Moving average (smooths out volatility and noise, identifies the current trend). Period 50. Marked in yellow on the chart.
• Moving average (smooths out volatility and noise, identifies the current trend). Period 30. Marked in green on the chart.
• MACD indicator (Moving Average Convergence / Divergence - convergence / divergence of moving averages) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands. Period 20
• Non-commercial traders are speculators, 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.
• The total non-commercial net position is the difference between non-commercial traders' short and long positions.
