To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to the level of 1.4085 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 and breakdown of the area of 1.4085, followed by its update from the bottom up, led to forming a good entry point into short positions in continuation of the observed trend yesterday in the afternoon. However, the market did not go down, and after a long "smearing" of the level of 1.4085, short positions had to be abandoned in favor of purchases, as a false breakdown was formed. At the time of writing, the pair went up about 15 points but met with an intermediate resistance of 1.4115, which we will talk about a little later.
The technical picture has changed a little, and now you should pay attention to the new levels. An important target for the bulls in the second half of the day will be the breakout of the new resistance of 1.4115, which was formed at the end of the European session. Only fixing 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 1.4147, where I recommend fixing the profit. The longer-range target will be the upper limit of the wide side channel 1.4189. With the next decline in GBP/USD in the second half of the day after the US inflation data, only the formation of a false breakdown in the support area of 1.4080 will signal to open long positions. This level acts as the lower boundary of a wide side channel, in which we are located for a fairly long period. In the absence of bull activity at this level and very strong data on inflation in the US, it is best to postpone purchases until the test of the minimum of 1.4041. I also recommend opening long positions immediately for a rebound in the area of 1.4008 with the aim of an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need to:
Sellers of the pound tried to do everything to achieve a breakdown of the lower border of the side channel. However, it was not possible without strong data on the US consumer price index. The bears still need to think about how to regain control of the 1.4080 since they will not count on a new downward trend without it. Strong data on the CPI index will lead to a breakout and consolidation below this range, and its reverse test from the bottom up will form an excellent entry point into short positions in the hope of reducing the pair to a new low in the area of 1.4041. A more distant goal will be the support of 1.4008, where I recommend fixing the profit. In case of GBP/USD growth in the second half of the day after the US data, the bears should focus on forming a false breakout in the resistance area of 1.4115. Suppose sellers do not show any activity at this high. In that case, it is best to postpone sales until the new resistance is updated at 1.4147 or even higher – to the level of 1.4189, where you can open short positions on the pound immediately for a rebound in the expectation of a downward correction of 20-25 points within the day. The level of 1.4189 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. It will be very difficult for the bulls to break through to new local highs. 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 below 30 and 50 daily averages, which indicates that pressure on the pound will remain in the short term.
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.
A break of the lower limit of the indicator in the area of 1.4090 will increase the pressure on the pound. A break of the upper limit of the indicator in the area of 1.4120 will lead to a new wave of growth of the pair.
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.