To open long positions on GBP/USD, you need:
Despite the high volatility of the pound in the first half of the day, unfortunately, it was not possible to wait to form a clear signal to enter the market. Let's look at the 5-minute chart and figure out what happened. The decline and breakthrough of 1.3606 occurred at the very beginning of the European session, however, when this level was tested from the bottom up (when a signal for opening short positions was to be formed), a reverse breakthrough of this level occurred, and the pair went above 1.3606, crossing out all the sellers' plans. There was also no signal to buy the pound since every time the price approached the level of 1.3606 from top to bottom, its breakdown occurred. For the second half of the day, the technical picture has partially changed.
The absence of important fundamental statistics in the second half of the day may also allow buyers of the pound to continue the upward correction of the pair. They managed to protect the support of 1.3606, which has already been transformed into the level of 1.3592, allowing the bulls to build the lower border of the new ascending channel. All that buyers need in the second half of the day is forming a false breakdown at this level. Its protection forms a signal to open long positions to expect a repeated recovery of GBP/USD to the day's maximum of 1.3639. A break of this range and a top-down test will form a new signal to buy GBP/USD, which will open a direct road to the maximum of 1.3674, where I recommend fixing the profits. A more distant target will be the area of 1.3716. If the pressure on GBP/USD returns in the afternoon, and the bulls will not offer anything in the support area of 1.3592, it is best to postpone long positions until the level of 1.3562 is updated. Or you can buy GBP/USD immediately for a rebound based on an upward correction of 25-30 points inside the day from the minimum of 1.3530.
To open short positions on GBP/USD, you need:
The initial task of the bears is now to protect the resistance of 1.3639, above which it is impossible to let the British pound go. Only the formation of a false breakdown will form a sell signal, which will increase the pressure on the pound and return it to the large daily support of 1.3592, for which an active struggle has already been conducted today. A breakdown and a reverse test of this level from the bottom up will lead to the formation of a new entry point into short positions, and the demolition of buyers' stop orders below will collapse the pair to a minimum of 1.3562 and then to a new support of 1.3530, where I recommend fixing the profits. The area of 1.3480 remains a longer-range target. If there are no active actions of sellers in the area of 1.3639, and there are moving averages that play on the sellers' side, I recommend postponing sales until the test of a larger maximum of 1.3674. It is also possible to sell GBP/USD immediately for a rebound from 1.3716 based on a downward correction of 25-30 points within the day.
The COT reports (Commitment of Traders) for July 13 recorded a sharp reduction in long positions and a slight increase in short ones. It suggests that inflation in the United States of America still affected the mood of buyers of the pound in a negative direction. The fact that the Bank of England representatives have recently been reluctant to talk about plans to reduce the bond purchase program once again proves their cautious position on this issue. On July 19 of this year, the UK government completely lifted all quarantine restrictions. However, according to the latest figures on the incidence of a new coronavirus "Delta" strain in the country, this is not for long. Undoubtedly, after each major movement of the GBP/USD down, traders show special interest since the central bank will start talking about curtailing measures to support the economy sooner or later, positively impacting the British pound and leading to its growth. But while there has not been a serious exit beyond the target level of inflation in the UK, it is unlikely that the Bank of England will rush to change its policy. Despite this, the optimal scenario is to buy the pound with each good decline in pair with the US dollar. The COT report indicates that long non-commercial positions decreased from the level of 57,232 to the level of 44,686, while short non-commercial positions increased from the level of 35,329 to the level of 36,717. As a result, the non-commercial net position decreased to 7,969 against 21,903. The closing price of last week rose slightly and amounted to 1.3886 against 1.3853.
Signals of indicators:
Trading is conducted below the 30 and 50 daily averages, which indicates that the pound will continue to decline in the short term.
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.
A break of the upper limit of the indicator in the area of 1.3639 will lead to a sharp increase in the British pound.
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.