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To open long positions on GBP/USD, you need:
The bears did their best yesterday, but the upward correction continued for the GBP/USD pair. Let's take a look at the 5 minute chart and talk about what happened. A breakthrough and consolidation below the level of 1.3884 and its reverse test formed a signal to open short positions, but the downward movement did not work. After returning to the 1.3884 level, the bulls managed to form a false breakout on it, which resulted in creating a signal to open long positions. Growth in the resistance area of 1.3938 reached more than 50 points.
Important data on activity in the manufacturing and services sector in the UK will be published today, which may lead to a rally in the pound, which will jeopardize the entire bear market that was formed last week. The bulls' main task in the first half of the day is a breakthrough and consolidation above the level of 1.3958. Its reverse test from top to bottom will open a direct path to the 1.4007 area, where I recommend taking profits. The next target will be the 1.4047 high, the test of which will completely cancel out the bear market. When GBP/USD drops to the 1.3907 area, the bulls need to form a false breakout there. Only this scenario can push GBP/USD to continue rising. If traders are not active in the 1.3906 area, then it is best to postpone long positions until the 1.3863 low is renewed. It is also possible to buy the pound immediately upon a rebound from the level of 1.3803, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The bears flee the market, and each breakthrough of major resistance results in their row of stop orders being removed. If this continues further, the bear market will end before it can begin. The bears' initial task is to protect the resistance at 1.3958. Forming a false breakout there will be a signal to sell the pound, which will push the pair to support at 1.3907. An equally important task will be a breakthrough and a reverse test of this level from the bottom up, which will result in creating another entry point into short positions and will allow GBP/USD to reach lows like 1.3863 and 1.3803, where I recommend taking profits. Disappointing UK fundamentals could help fuel this scenario. If the bears are not active in the resistance area of 1.3958, then I recommend postponing short positions until the test of the larger area of 1.4007, where you can sell the pound immediately on a rebound, counting on a downward correction of 20-25 points within the day.
The Commitment of Traders (COT) reports for June 15 showed that both long and short positions sharply decreased, however, this did not negatively affect the positive delta, but, on the contrary, even increased it due to a larger reduction in the bears' positions. The data was collected even before the Federal Reserve announced its decision on monetary policy, so I recommend not paying special attention to them, since at the moment the picture is already of a different nature. Good inflation in the UK will continue to create a certain pressure on the Bank of England, but so far there is no reason for panic, as is the case in the US, for the British central bank. This week, the central bank will hold a meeting, where most likely everything will remain unchanged, which may lead to continued pressure on the British pound and it may continue to fall against the US dollar in the short term. Similar statements from representatives of the Bank of England no longer work, so the market will only react to new guidelines for monetary policy, if any. Another important moment for the pound would be the full opening of the UK economy, which is slated for the 20th of this month. The spread of the Indian strain of the coronavirus in the territory creates a number of obstacles to this, which affects the desire of investors to buy the British pound. The best scenario is buying for every good decline in the British pound against the US dollar. The COT report showed that long non-commercial positions fell from 59,238 to 55,203, while short non-commercial positions significantly fell from 31,524 to 23,033. As a result, the non-commercial net position rose from 27,714 to 32,170. Last week's closing price significantly changed and reached 1.4109 against 1.4175.
Indicator signals:
Trading is carried out above 30 and 50 moving averages, which indicates a continuation of the upward correction for the pound.
Moving averages
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.
Bollinger Bands
Surpassing the upper border of the indicator in the area of 1.3965 will lead to a new wave of growth for the pound. In the event of a decline, support will be provided by the lower border of the indicator in the area of 1.3895.
Description of indicators
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