To open long positions on GBP/USD, you need:
Yesterday several signals were formed to enter the market, which were quite profitable. Let's take a look at the 5 minute chart and break down the entry points.
In the forecast for the first half of the day, I paid attention to the level 1.4153 and recommended it to make a decision on entering the market. A decline to the level of 1.4153 at the beginning of the European session resulted in forming a false breakout and creating 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 amounted to about 35 points.
Towards the middle of the day, I expected a false breakout to form in the area of resistance 1.4189, but it never came to that, and the pair quickly returned, and then fell below the support at 1.4153. The test of this level from the bottom up created an excellent entry point into short positions, which led to a rapid fall in GBP/USD to the support area of 1.4121. The downward movement was about 30 points.
Today there is no important data on the UK and representatives of the Bank of England will not speak either. Therefore, it is likely that yesterday's disappointing results of the EU-UK meeting to resolve the trade conflict in Northern Ireland will continue to put pressure on the pound. Traders will focus their attention on the ECB meeting, therefore, there has not yet been a place for the pound. Only the US inflation report can somehow affect the pair's succeeding direction, so do not be surprised if the pressure on the pound persists in the first half of the day. The initial challenge for the bulls in the European session is to protect the support at 1.4085. This level represents the lower border of a narrow horizontal channel, in which the pair has been for the last three weeks. Forming a false breakout there will be the first signal to open long positions for the purpose of a recovery to the 1.4142 area. A much more important challenge is to regain control of this range. Consolidating on it with a subsequent test from top to bottom will result in creating a signal to open long positions in order to exit to the high of 1.4189, where I recommend taking profits. If GBP/USD drops to the 1.4085 area and the bulls are not active there, it is best to postpone long positions until the 1.4041 low is renewed. I also recommend opening long positions immediately on a rebound from the level of 1.4008, counting on an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The bears coped with the task and regained control of the middle of the channel. Now we need to think of a way to fall below the level of 1.4085, which saved the pound from a major sell-off more than four times. This will not be easy without important fundamental reports, but the bears have yesterday's downward direction after the meeting of representatives of the EU and the UK. But only a breakthrough and consolidation below the level of 1.4085 with a reverse test of it from the bottom up can create a point of entry into short positions in hopes of returning to support at 1.4041 and an exit to new lows in the area of 1.4008, where I recommend taking profits. In case GBP/USD grows in the first half of the day, bears should focus on the resistance at 1.4142, where the moving averages, playing on the side of bears, also pass. Forming a false breakout there creates a good entry point for short positions. If the bears are not active at this high, then it is best to postpone selling until the resistance update at 1.4189, where you can open short positions in the pound immediately on the rebound, counting on a downward correction of 20-25 points within the day.
The Commitment of Traders (COT) reports for June 1 showed a slight increase in long positions and a very large growth in short ones, which was evidence of a sharp fall in the pound. The statements of the Bank of England representatives no longer work, as market participants need concrete actions, not promises. Until they are present, it will be very difficult for the bulls to surpass new local highs. The risk of a later opening of the UK economy due to the spread of the Indian strain of the coronavirus also poses a number of disincentives for the bulls. However, as soon as the central bank starts to take inflation seriously and talk about changes in the volume of the asset purchase program, the demand for GBP/USD will immediately return. Therefore, the optimal scenario is buying everytime there is a good decline in the British pound against the US dollar. The COT report indicated that long non-commercial positions rose from 64,193 to 64,204, while short non-commercial positions rose much stronger from 33,534 to 40,079, which indicates the emergence of new bears in the market after a couple of regular local highs. As a result, the non-commercial net position decreased from the level of 30,659 to the level of 24,125. The closing price of the last week changed and amounted to 1.42270 against 1.41553.
Trading is carried out below 30 and 50 moving averages, which indicates an attempt by the bears to turn the market in their direction.
Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.
Surpassing the lower border of the indicator in the area of 1.4085 will lead to a new wave of decline for the pound. Growth will be limited in the area of the upper border of the indicator at 1.4170.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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 short and long positions of non-commercial traders.