In my morning forecast, I focused on the level of 1.2877 and planned to make market entry decisions based on it. Let's look at the 5-minute chart and see what happened. A decline and a false breakout at this level led to a buy signal for the pound, resulting in a rise of over 30 points. Selling on the false breakout from 1.2906 also allowed for about 25 points of profit. The technical picture for the second half of the day remains unchanged.
For Opening Long Positions on GBP/USD:
Given how well everything is functioning, there's no need to change the approach. Important US GDP data can significantly change the market, but it's best to act on high volatility from more distant levels in such cases. The figures for GDP change for the second quarter of this year, and the Personal Consumption Expenditures (PCE) index can lead to significant market movements. Strong data will likely push the pound back down to 1.2874, where another intense battle might unfold. A long position should be considered only if a false breakout occurs. The target would be a return to the intermediate resistance level at 1.2906, where the moving averages are positioned. A breakout and a top-down retest of this range will restore the pound's upward potential, leading to a point for entering long positions with the possibility of testing 1.2934. The furthest target will be the area of 1.2971, where I will take profit. If GBP/USD continues to decline and there is no bullish activity around 1.2874 in the second half of the day, the pound will continue to fall. This will also lead to a decline and an update of the next support at 1.2842, marking the end of the recent bullish market. A false breakout will be a suitable condition for opening long positions. I plan to buy GBP/USD immediately on a rebound from the minimum of 1.2806, targeting an intraday upward correction of 30-35 points.
For Opening Short Positions on GBP/USD:
Like the buyers, the sellers have already shown themselves today, but good GDP data could give them an additional advantage. In the event of a surge in GBP/USD after the statistics release and protection of 1.2906, it will be possible to get a good entry point for short positions, targeting a decline to the new support at 1.2874, formed based on today's results. A breakout and a bottom-up retest of this range will hit the buyers' positions, triggering stop-loss orders and opening the way to 1.2842. The furthest target will be the area of 1.2806, where I will take profit. Testing this level will end the battle between buyers and sellers. If GBP/USD rises and there is no bearish activity at 1.2906 in the second half of the day, buyers will have a chance for growth. In this case, I will postpone sales until a false breakout at 1.2934. If there is no downward movement, I will sell GBP/USD immediately on a rebound from 1.2971, but only for an intraday downward correction of 30-35 points.
The COT report (Commitment of Traders) for July 16 showed an increase in long positions and a decrease in short positions. The Bank of England's decision to keep everything as it is allowed the pound to grow quite well, especially amid expectations of US interest rate cuts. The change in political power also contributed to some growth in GBP/USD. However, the market is now experiencing some calm, which could lead to the pair stalling in a sideways channel or further technical correction. The lower the pound, the more attractive it will be for purchases. The latest COT report states that long non-commercial positions increased by 47,971 to 183,287, while short non-commercial positions fell by 241 to 50,385. As a result, the gap between long and short positions decreased by 1,478.
Indicator Signals:
Moving Averages
Trading is conducted below the 30 and 50-day moving averages, indicating a possible continuation of the pair's decline.
Note: The period and prices of the moving averages considered by the author are on the H1 hourly chart and differ from the general definition of classical daily moving averages on the D1 daily chart.
Bollinger Bands
In case of a decline, the indicator's lower boundary, around 1.2874, will act as support.
Indicator Descriptions:
- Moving average (MA): A moving average determines the current trend by smoothing volatility and noise. Period 50. Marked in yellow on the chart.
- Moving average (MA): A moving average determines the current trend by smoothing volatility and noise. Period 30. Marked in green on the chart.
- MACD (Moving Average Convergence/Divergence): Quick 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 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: The difference between non-commercial traders' short and long positions.
