Yesterday, there was only one entry point. Now, let's look at the 5-minute chart and figure out what actually happened. In my morning article. I turned your attention to 1.2669 and recommended making decisions with this level in focus. A rise and a false breakout of this level gave an entry point into short positions. It led to a 30-pip drop in the pair. In the afternoon, there were no entry points to enter long positions.
When to open long positions on GBP/USD:
The ECB's rate decision facilitated the growth of the pound sterling. Next week, the Bank of England will hold a meeting. It is likely to hike the interest rate as well. The lack of economic reports may help the pound sterling climb. However, the divergence of the MACD indicator that was formed on the 1H chart can create problems. For this reason, I would advise you not to rush with long positions in the morning. I expect large buyers to enter the market after the correction of the support level of 1.2757. A false breakout there could provide an entry point into long positions in the continuation of the bullish trend. The pair may aim at the resistance level of 1.2798. A breakout and consolidation above this level will give an additional buy signal with a jump to a monthly high of 1.2837, which will only boost the uptrend. A more distant target will be the 1.2876 level where I recommend locking in profits.
If the pair declines to 1.2757 and bulls fail to protect this level, which is more likely, the pressure on the pound sterling will increase at the end of the week. However, a trend reversal will hardly take place. The pair could consolidate in the sideways channel. In this case, only the protection of the 1.2713 level where the moving averages are passing in positive territory as well as a false breakout may provide entry points into long positions. You could buy GBP/USD at a bounce from 1.2669, keeping in mind an upward intraday correction of 30-35 pips.
When to open long positions on GBP/USD:
Bears didn't have a chance to regain control yesterday. They are unlikely to do it today. I would advise you to sell the pound sterling only after a jump to the resistance level of 1.2798 resistance, a false breakout, and a divergence of the MACD indicator. A fall from this level could be quite rapid. If there is no downward movement to 1.2757 for several hours after a signal, it would be better to exit the market. Only a breakout and an upward retest of 1.2757 will force bulls to close long positions which will increase pressure on GBP/USD. It could give a sell signal with a drop to 1.2713. A more distant target will be a low of 1.2669 where I recommend locking in profits.
If GBP/USD rises and bears fail to defend 1.2798, which is more likely, bulls continue to control the market. The pair could reach monthly highs. In this case, I would advise you to postpone short positions until a false breakout of the resistance level of 1.2837. If there is no downward movement there, you could sell GBP/USD at a bounce from 1.2876, keeping in mind a downward intraday correction of 30-35 pips.
COT report
According to the COT report (Commitment of Traders) for June 6, there was a drop in short and long positions. The pound sterling has risen markedly recently. It means that investors are betting on further aggressive tightening by the BoE. Risk appetite is growing amid expectations that the economy could avoid a recession this year. The Fed is widely expected to take a pause in the tightening cycle. It is extremely bullish for GBP/USD. The latest COT report showed that short non-commercial positions decreased by 4,056 to 52,579, while long non-commercial positions fell by 5,257 to 65,063. It led to a slight decline in the non-commercial net position to 12,454 against 13,235 a week earlier. The weekly price rose to 1.2434 against 1.2398.
Indicators' signals:
Trading is carried out above the 30 and 50 daily moving averages, which indicates a bull market.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD declines, the indicator's lower border at 1.2713 will serve as resistance.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.
