Yesterday, there were several excellent entry points. Now, let's look at the 5-minute chart and figure out what actually happened. In my morning article, I turned your attention to 1.2774 and recommended making decisions with this level in focus. A rise and a false breakout of this level led to a sell signal but it did not trigger a steep downward movement. It is not surprising given the BoE's hawkish rhetoric. A breakout and a downward retest of 1.2774, which took place a little later, created a buy signal, which resulted in an increase of more than 60 pips. In the afternoon, the pair failed to grow despite the protection of 1.2741 by bulls and a buy signal. This signal brought about 20 pips of profit.
When to open long positions on GBP/USD:
The pound sterling remained unaffected by monthly retail sales data. After an unsuccessful attempt to rise, it retreated to the support level of 1.2692. Today, the Manufacturing and Services PMI Indices for June are on tap. The Composite PMI index is likely to be above 50 amid a positive Services PMI Index, which could trigger an increase in the pound sterling.
Now, the pair is correcting after an upward movement yesterday. I would advise you to pay attention to the support level of 1.2692. A false breakout there could give good entry points into long positions. The pair may recover to 1.2753, which is the middle of the sideways channel, formed yesterday. There are also moving averages, passing in negative territory which could limit the upward potential of the pair. Bulls need to protect this level. A breakout and consolidation above this level will provide an additional buy signal with a jump to 1.2813. A more distant target will be the 1.2876 level where I recommend locking in profits.
If the pair declines to 1.2692 and bulls fail to defend this level, the pressure on the pound sterling will increase. It could lead to a more powerful downward movement to a weekly low of 1.2625. The protection of this level, as well as a false breakout, may give entry points into long positions. You could buy GBP/USD ay a bounce from 1.2574, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
Bears regained control yesterday. They need to defend 1.2753. A breakout of this level may occur after the release of the UK PMI Indices. A false breakout of this level could create a sell signal, which will return pressure on the pair. It may drop to 1.2692. A breakout and an upward retest will force bulls to close their short positions on GBP/USD. It is likely to fall to 1.2625. A more distant target will be the 1.2574 level where I recommend locking in profits. If GBP/USD rises and bears fail to protect 1.2753, at a downward correction will hardly occur. Bulls will be in control again. In this case, I would advise you to postpone short positions until a false breakout of the resistance level of 1.2813. It could give an entry point into short positions. 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 13, there was a sharp increase in long and short positions. The pound sterling has grown markedly recently. As a rest, sellers began to enter the market. However, the BoE's aggressive tightening and the latest inflation data boosted an upward movement. Traders are betting on new rate hikes. The fact that the Fed skipped a rate hike in its tightening cycle. However, the Bank of England will hardly take a pause. It spurs demand for the pound sterling. The latest COT report showed that short non-profit positions rose by 17,069 to 69,648, while long non-profit positions jumped by 11,320 to 76,383. This led to a slight decrease in the non-commercial net position to 6,736 against 12,454 a week earlier. The weekly price climbed to 1.2605 against 1.2434.
Indicators' signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates the likelihood of a downward movement by the end of the week.
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 GBP/USD declines, the indicator's lower border at 1.2705 will serve as support.
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.
