In my morning forecast, I highlighted the level of 1.3004 and planned to make trading decisions based on it. Let's look at the 5-minute chart and see what happened. The rise and the formation of a false breakout at that level provided a suitable entry point for short positions. However, after the pound fell by 15 points, the sellers' initiative faded. The technical picture was not revised for the second half of the day.
For Opening Long Positions on GBP/USD:
The bullish market for the pound persists, but to continue its development, more data indicating aggressive rate cuts in the U.S. in September this year is needed. Such hints could potentially come from FOMC members Raphael Bostic and Michael S. Barr today. A dovish tone from the policymakers would provoke new purchases of the pound and a renewal of the monthly high. Meanwhile, it is best to wait for a decline and the formation of a false breakout around the support at 1.2971, which missed being tested by just a few points in the first half of the day. This would provide an entry point for long positions, aiming for another attempt to break above 1.3004, which it failed to surpass earlier. Only a breakout above this range followed by a retest would strengthen the chances of developing an upward trend, leading to the triggering of stop orders of sellers and a suitable entry point for long positions with the potential to reach the 1.3040 level. The ultimate target will be 1.3085, where I plan to take profit. If GBP/USD declines and there is no bullish activity around 1.2971 in the second half of the day, especially since moving averages pass through this level, pressure on the pair will increase. This could also lead to a decline and the testing of the next support at 1.2941. Only a false breakout at this level would create a good opportunity for opening long positions. I plan to buy GBP/USD immediately on a rebound from the low of 1.2911 with the target of a 30-35 point correction within the day.
For Opening Short Positions on GBP/USD:
Sellers have shown themselves, but active selling has not yet occurred. If the pair rises again, only a false breakout around 1.3004, similar to what I discussed earlier, will bring pressure back on the pair. This would provide an opportunity to open short positions, aiming to test the support at 1.2971. A breakout below this range followed by a retest will strike at the positions of buyers, leading to the triggering of stop orders and opening the way to 1.2941, where I expect more active actions from major players. The ultimate target will be 1.2911, where I plan to take profit. Testing this level will significantly undermine the pound's bullish potential. If GBP/USD rises and there is minimal reaction around 1.3004 in the second half of the day, which is more likely, the initiative will remain with the buyers, who will have the chance to further build a bullish market. In this case, I will postpone sales until a false breakout at the 1.3040 level. If there is no downward movement there either, I will sell GBP/USD immediately on a rebound from 1.3085, but only with the expectation of a 30-35 point correction of the pair within the day.
The COT report (Commitment of Traders) for August 13 indicated a significant reduction in long positions and a modest increase in short positions. Clearly, recent statements from the Bank of England, which indicated plans to lower interest rates, as well as economic data showing a decrease in price pressures, were key factors for traders abandoning new long positions, as lower rates will make the pound less attractive. However, despite the dovish stance of the central bank, the pound managed to resume its growth due to the overly significant weakness of the U.S. dollar, which continues for the same reasons: the Federal Reserve is expected to cut interest rates in September this year for the first time since the start of the coronavirus pandemic. The latest COT report indicates that long non-commercial positions fell by 23,477 to 102,603, while short non-commercial positions increased by 3,110 to 54,791. As a result, the gap between long and short positions increased by 3,218.
Indicator Signals:
Moving Averages:
The pair is trading above the 30 and 50-day moving averages, indicating potential further growth for the pound.
Note: The period and prices of the moving averages are considered by the author on the H1 hourly chart and differ from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands: In the event of a decline, the lower boundary of the indicator around 1.2971 will act as support.
Indicator Descriptions:
- Moving Average: Determines the current trend by smoothing volatility and noise. 50-period, marked in yellow on the chart.
- Moving Average: Determines the current trend by smoothing volatility and noise. 30-period, 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: 20-period.
- 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.
- Total non-commercial net position: The difference between short and long positions of non-commercial traders.
