Yesterday there was only one signal to enter the market. Let's have a look at the 5-minute chart and see what happened there. In my morning review, I mentioned the level of 1.2427 as a possible entry point. A breakout and an upward test of this mark will produce a sell signal after bulls fail to protect that range during the European session. As a result, the pair collapsed by almost 30 pips. Protecting the support level of 1.2395 made it possible for us to take more than 30 pips.
For long positions on GBP/USD:
Buyers have problems with the pair's growth and until the exchange rate settles above 1.2455, we can't speak about regaining the advantage. The UK's Halifax House Price Index will be released today, which doesn't have much impact on the currency market, so buyers will have a chance to see the GBP/USD recover in the short term.
However, like yesterday, I will only act on the decline. Defending the new support level of 1.2395, along with the formation of a false breakout, will provide an excellent entry point for long positions. The next resistance at 1.2425, around which the pair traded during the whole Asian session, is another target. A breakout and consolidation above this range on the weak UK real estate market data will produce another buy signal, leading to a breakthrough of 1.2455. A more distant target will be the 1.2484 where I recommend locking in profits.
If GBP/USD falls and there is no bullish activity at 1.2395, the pound will face pressure, and bears will have a chance to renew the weekly lows. If that happens, I recommend postponing long positions until 1.2369. Traders may open buy positions there after a false breakout. Traders may also go long just after a rebound from 1.2340, expecting a correction of 30-35 pips within the day.
For short positions on GBP/USD:
Bears showed that they refuse to give up. That is why I expect them to be active around the resistance level of 1.2425, and after a false breakout above the same range, this will produce a sell signal, and the pair could fall to 1.2395, a new support level. A breakout and downward retest of this range will form another signal, but this is only possible if we receive strong US data, which we will talk about in the afternoon. All this will put pressure on GBP/USD, forming a sell signal, and the pair could fall to 1.2369. A more distant target will be the 1.2340 low where I recommend locking in profits.
If GBP/USD grows and bears fail to protect 1.2425, which is an intermediate resistance level, then we can expect a small correction. In such a case, only a false breakout in the area of a larger resistance at 1.2455 will form an entry point for short positions, and we've already seen the pound in that area. A false breakout there will give an entry point to the short positions. In the absence of activity there, I recommend selling GBP/USD from 1.2484, expecting a bounce of 30-35 pips within the day.
COT report:
The COT report (Commitment of Traders) for May 30 showed a drop in short positions and an increase in long positions. The pound experienced a significant decline, but decent statistics released last week helped to halt the decline and partially recoup losses suffered in May. However, expectations that the Federal Reserve will continue to raise interest rates are capping the pair's upside potential. Despite the central bank's pause in June, an overheated labor market will not allow the committee to halt the cycle of tightening monetary policy for long. Further uncertainty about the BoE's monetary policy will exert pressure on the British pound. According to the last COT report, short non-commercial positions decreased by 529 to 57,085, while long non-commercial positions increased by 1,117 to 70,320. This led to an increase in the non-commercial net position to 13,235 from 11,059 a week earlier. The weekly price decreased to 1.2398 from 1.2425.
Indicator signals:
Moving Averages
Trading is performed around the 30- and 50-day moving averages, which points to the sideways movement.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If the pair falls, the lower band of the indicator at 1.2395 will act as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.
