To open long positions on GBP/USD, you need:
In the first half of the day, the pound sellers tried to push the pair to the lows of yesterday, but due to the low volatility of the market, we did not reach the levels I indicated in the morning. Because of this, no signals were formed to enter the market. Most likely, the focus will be shifted to the second half of the day, when data on the US economy will be released. Only their serious discrepancy with the forecast will lead to a surge in volatility.
The technical picture remained almost unchanged. Buyers of the pound still need to regain the level of 1.3933, in the area of which the moving averages are now passing, playing on the sellers' side. A breakdown and consolidation above this level and its reverse test from top to bottom will form a buy signal and open a direct road to the 1.3996 area, where I recommend fixing the profits. A more distant target will be a maximum of 1.4047, the test of which will completely cancel out the bear market. If the pressure on the pound continues in the second half of the day, and the data on spending and income of Americans will please economists, then we will see a decline in the pair to the area of 1.3880. Only the formation of a false breakdown at this level forms a signal to open long positions to continue the pound's growth. If there is no activity of buyers in the area of 1.3880 and the further fall of GBP/USD, it is best to postpone long positions until the minimum of 1.3833 is updated. It is also possible to buy the pound immediately on a rebound from the level of 1.3774 with the aim of an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The bears coped with their task in the first half of the day and defended the resistance of 1.3943, which the pair did not even reach. For this reason, there were no signals for entering the market. In the case of a repeated growth of GBP/USD in the second half of the day, only the formation of a false breakdown in the area of 1.3933 will be a signal to sell the pound, which will push the pair to the support of 1.3880. An equally important task of the bears will be a breakthrough and a reverse test of this level from the bottom up, which will lead to the formation of an additional entry point into short positions and will allow GBP/USD to get to the lows of 1.3833 and 1.3774, where I recommend fixing the profits. Strong data on the US economy, including the index of consumer sentiment and inflation expectations from the University of Michigan, can help implement such a scenario. If there are no active actions of sellers in the resistance area of 1.3933, I recommend postponing sales until the test of this week's maximum-1.3996, or even higher - to the level of 1.4047, where you can open short positions immediately for a rebound based on a downward correction of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for June 15 recorded a sharp reduction in both long and short positions. However, this did not negatively affect the positive delta. On the contrary, it even increased due to a larger reduction in sellers' positions. The data was collected even before the Federal Reserve decided on monetary policy, so I recommend not paying much attention to them since the picture is already different at the moment. Good inflation in the UK will continue to create some pressure on the Bank of England, but so far, the British regulator has no reason to panic, as it is happening in the US. This week, the Central Bank will hold a meeting where everything will remain unchanged, leading to continued pressure on the British pound and continuing its fall against the US dollar in the short term. Similar statements by representatives of the Bank of England no longer work. Thus, the market will react only to new guidelines regarding monetary policy. An important moment for the pound will also be the full opening of the UK economy, which is scheduled for the 20th of this month. The spread of the Indian strain of coronavirus on the state's territory creates several obstacles to this, which affects the desire of investors to buy the British pound. The optimal scenario remains purchases for every good decline of the British pound against the US dollar. The COT report indicates that long non-commercial positions fell from the level of 59,238 to 55,203, and short non-commercial positions fell much more strongly — from the level of 31,524 to the level of 23,033. As a result, the non-commercial net position increased from the level of 27,714 to the level of 32,170. The closing price of last week changed significantly and amounted to 1.4109 against 1.4175.
Signals of indicators:
Trading is conducted above 30 and 50 moving averages, which indicates an attempt by the bulls to continue the upward trend in the pair;
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
The growth will be limited near the upper level of the indicator 1.4230. If the pair falls, the lower border of the indicator around 1.4130 will provide support.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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.