To open long positions on GBP/USD, you need:
In the first half of the day, I paid attention to several levels, where I advised making decisions on entering the market. Let's look at the 5-minute chart and analyze the entry points. The breakthrough of 1.3719 took place at the very beginning of the European session, but I did not wait for a reverse test of this level from top to bottom. For this reason, I was forced to skip the entry point into long positions. But nothing ended there: the formation of a false breakdown in the resistance area of 1.3756 led to the formation of an excellent entry point into short positions, which quickly brought the British pound to the support of 1.3719, allowing it to take its 30 points lost at the beginning of the day from the market. For the second half of the day, the technical picture in the pair has only partially changed, so let's look at the new levels.
The whole focus has shifted to the meeting of the European Central Bank, as the market reaction may affect the EUR/GBP pair, which will affect the GBP/USD pair. However, the pound buyers are unlikely to leave the resistance of 1.3756 alone, so all they need is a breakthrough and consolidation above this range. From top to bottom, the reverse test of this level forms an additional signal to open long positions in the expectation of a return to 1.3791 and 1.3823, where I recommend fixing the profits. A longer-range target will be a maximum of 1.3859. If the bears are more persistent and do not let the pair go above 1.3756, it is best not to rush with long positions. The optimal scenario would be a decline in GBP/USD and the formation of a false breakdown in the area of 1.3715. Good data on the American labor market will help in the implementation of this option. You can buy the pound immediately for a rebound based on an upward correction of 25-30 points within the day from the minimum of 1.3674, where the moving averages also play on the side of the bulls.
To open short positions on GBP/USD, you need:
The initial task of the bears is now to protect the resistance of 1.3756, above which it is impossible to let the British pound go. Buyers are very persistent now, and the only thing that sellers can count on is a meeting of the European Central Bank. No other important fundamental statistics are expected today, and the weekly report on the US labor market is not a particularly important reason to sell the pound. Only the formation of a false breakout at the level of 1.3756 forms a sell signal, which will return the pressure on the pound and push it to the support of 1.3715, from which we watched a large growth of the pair today. A breakdown and a reverse test of this level from the bottom up will lead to forming a new entry point into short positions. The demolition of buyers' stop orders below will collapse the pair to a minimum of 1.3674 and then to a new support of 1.3636, where I recommend fixing the profits. The area of 1.3592 remains the longer-range target. In the absence of active actions of sellers in the area of 1.3756, I recommend postponing sales until the test of a larger maximum of 1.3791. It is also possible to sell GBP/USD immediately for a rebound from 1.3823, 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 is no 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 above 30 and 50 daily averages, which indicates that the pound will continue to grow 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.
In case of a decline in the pair, the lower border of the indicator in the area of 1.3685 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.