In my morning forecast, I highlighted the level of 1.2669 and recommended making trading decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The upward movement and the formation of a false breakout at this level provided entry points for short positions. However, the downward movement was only about 15 points when writing the article. The technical picture for the second half of the day remained unchanged.
To open long positions on GBP/USD, the following is required:
If trading is below 1.2669, pressure on the pound will persist. For this reason, I advise shifting focus to US data and how traders react to them. Attention will be drawn to the indicator for changes in retail sales volume and data on the number of initial jobless claims. If they turn out better than economists' forecasts, it may support a stronger decline in the pound. Good figures on changes in industrial production and the growth of the Federal Reserve Bank of Philadelphia's manufacturing index will also favor the US dollar.
Therefore, for those planning to further buy the pound, it is best to wait for a decline and the formation of a false breakout around the nearest support level at 1.2625, where the moving averages are playing on the bull's side. A false breakout there will signal a buying opportunity in continuation of the bullish trend, with a target above the resistance level at 1.2669, which prevented the pair from developing a bullish scenario today. A breakthrough and a reverse test from above to below this range will leave no chances for sellers and form an additional signal to open long positions with a move towards 1.2709, strengthening the upward trend. The ultimate target will be the area around 1.2755, where I will take profit.
In a pound decline towards 1.2625 and a lack of buyer activity, pressure on the pair will return. In that case, I will postpone market entry until the support level at 1.2574, where the moving averages are on the bull's side. I will only open long positions there on a false breakout. I plan to buy GBP/USD immediately on a rebound from 1.2527, with a 30-35 point correction target within the day.
To open short positions on GBP/USD, the following is required:
Sellers have done everything they can, but the pound is not showing much inclination to fall at the moment. All hope rests on strong US data, which may help defend 1.2669, where the pound is trading. I will open short positions there only after the formation of a false breakout, similar to what I discussed earlier. This will allow a larger downward movement towards the support at 1.2625. A breakthrough and a reverse test from below to above this range will revive the chances of a downward correction, forming a signal to open short positions with a decline towards 1.2574. The ultimate target remains at least 1.2527, where I will take profit. Buyers will continue to dominate if GBP/USD continues to rise and there is no activity at 1.2669. In that case, I will postpone selling until testing the resistance at 1.2709. A false breakout there will be a point of entry for short positions. I plan to sell GBP/USD immediately on a rebound from the May high around 1.2755 but only expect a pair correction down by 25-30 points within the day.
The COT report (Commitment of Traders) for June 6 showed a reduction in both short and long positions. The pound has risen significantly recently. This indicates that many market participants continue to bet on an increase in interest rates by the Bank of England. Recent forecasts and expectations that the UK economy will avoid a recession this year also contribute to the demand for risky assets. We are facing a pause in the cycle of interest rate hikes by the Fed, which will also support buyers of GBP/USD. The latest COT report states that short non-commercial positions decreased by 4,056 to 52,579, while long non-commercial positions fell by 5,257 to 65,063. This led to a slight decrease in the non-commercial net position to 12,454 against 13,235 the previous week. The weekly price rose to 1.2434 from 1.2398.
Indicator signals:
Moving Averages
Trading occurs above the 30-day and 50-day moving averages, indicating further pair growth.
Note: The author considers the period and prices of the moving averages on the hourly H1 chart, which differs from the general definition of classical daily moving averages on the daily D1 chart.
Bollinger Bands
In case of a decrease, the lower boundary of the indicator, around 1.2625, will act as support.
Description of Indicators
• Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands. Period 20.
• Non-commercial traders - speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting certain requirements.
• Long non-commercial positions represent the total long open positions of non-commercial traders.
• Short non-commercial positions represent the total short open positions of non-commercial traders.
• The net non-commercial position is the difference between non-commercial traders' short and long positions.
