To open long positions on GBP/USD, you need to:
Today, in my morning forecast, I paid attention to the level of 1.4153 and recommended that you decide on entering the market from it. Let's look at the 5-minute chart and talk about what happened in the end. The decline to the level of 1.4153 at the beginning of the European session led to a false breakout and the formation of a signal to open long positions. By the middle of the day, the pound recovered to the resistance area of 1.4189, and the profit was about 35 points. The market continues to be controlled by buyers who are still counting on the breakdown of the local high of 1.4189. However, good news is needed for this.
From a technical point of view, nothing has changed. The buyers coped with their initial task, protecting the support of 1.4153. Now, the more important goal of the bulls will be to return to the control of the resistance of 1.4189, which they came close to during the European session. Only fixing on this range with its subsequent test from top to bottom will lead to the formation of a signal to open long positions with an exit to the maximum of 1.4241, where I recommend fixing the profit. Suppose the GBP/USD declines in the second half of the day after the data on the US economy. In that case, only the next formation of a false breakdown in the support area of 1.4153 will be a signal to open long positions. In the event of a lack of bull activity at this level and bad news on the Brexit negotiations between the EU and the UK, it is best to postpone long positions until the test of the low of 1.4121. I recommend opening long positions immediately for a rebound only in the area of 1.4085 with the aim of an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need to:
The bears need to think about how to regain control of the intermediate support of 1.4153, which they failed to do in the first half of the day. In the absence of important fundamental statistics, this will not be so easy to do. Therefore, only a break and consolidation below this range with a reverse test of it from the bottom up will lead to the formation of an entry point into short positions in the expectation of a return of the pair to the support of 1.4121 and an exit to new lows in the area of 1.4085, where I recommend taking the profits. If the GBP/USD rises in the second half of the day on the back of good news on Brexit, which is unlikely, the bears should focus on the formation of a false breakout in the resistance area, from which the pound has been falling since the end of last week. Suppose sellers do not show any activity at this high. In that case, it is best to postpone sales until the update of the new resistance of 1.4241, where you can open short positions on the pound immediately on the rebound in the expectation of a downward correction of 20-25 points within the day. The level of 1.4241 is the upper limit of a wide side channel, the exit beyond which will determine the pair's further direction.
Let me remind you that the COT reports (Commitment of Traders) for June 1 recorded a minimal increase in long positions and a very large increase in short positions, which was proof of a sharp drop in the pound. Statements from the Bank of England representatives no longer work, as market participants need concrete actions, not promises. The risk of a later opening of the UK economy due to the spread of the Indian strain of coronavirus also creates several obstacles for buyers of the pound. However, as soon as the central bank begins to take inflation seriously and talk about changes in the volume of the asset purchase program, demand for GBP/USD will immediately return. Therefore, the best scenario is to buy at every good decline in the British pound against the US dollar. The COT report indicates that long non-commercial positions rose from the level of 64,193 to the level of 64,204. However, short non-commercial positions rose much stronger from 33,534 to 40,079, indicating the emergence of new sellers in the market after the pair reached another local high. As a result, the non-profit net position decreased from 30,659 to the level of 24,125. Last week's closing price changed to 1.42270 against 1.41553.
Signals of indicators:
Trading is conducted above 30 and 50 daily averages, but so far, this does not indicate the formation of a new upward trend.
Note: The period and prices of the 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.
In the event of a decline in the pound, the lower limit of the indicator in the area of 1.4145 will act as 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.