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To open long positions on GBP/USD, you need:
With each decline from the pound, the bulls make a series of efforts aimed at reversing the bear market, but this does not work very well, since the bears update local lows each time, keeping the market under their control. Quite a lot of signals were generated yesterday, let's take a look at the 5-minute chart and break them down.
The bears did not let the pair rise above the resistance level of 1.3831 in the first half of the day, forming a false breakout there and creating a good signal to open short positions as the trend continues. As a result, the decline was around 40 points and reached the support area of 1.3787. The price surpassed this level a little later, but it was not possible to enter short positions from this level, since I did not wait for a reverse test from the bottom up. A similar situation happened with long positions after the bulls took control over this level.
In the second half of the day, after reviewing the technical picture of the pair, the emphasis was placed on the support of 1.3768, where a false breakout resulted in creating an entry point into long positions. Unfortunately, the pound did not sharply rise, and what happened to the high – nothing.
Yesterday's speech by Bank of England Governor Andrew Bailey put serious pressure on the pound, which may weaken today, provided that the data on the US labor market turns out to be worse than economists' forecasts. There are no reports on the UK today, so we can only count on how active the bulls are, by analogy with yesterday. Forming a false breakout at the level of 1.3751 generates a signal to open long positions, while expecting a reversal of the bear market. In this case, the nearest target will be resistance at 1.3811, which was formed at the end of Thursday. Moving averages that play on the side of the bears are just below this range. A breakthrough and reverse test of this area from top to bottom will generate a new buy signal and open a direct road to the 1.3870 high, where I recommend taking profits. The next target will be the 1.3922 high, but it will not be so easy for the bulls to reach it. If the pressure on GBP/USD persists in the first half of the day, and the bulls are not active in the 1.3751 area, it is best to postpone long positions until the 1.3717 low is updated, or even lower - until the 1.3674 support test, from which I recommend buying the pair immediately on a rebound with a target upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The initial task of the bears is to protect the resistance at 1.3811, just below which the moving averages are, which determines the direction of the market movement. Forming a false breakout there will be a signal to sell the pound, which will push the pair to new lows around 1.3751. Surpassing this level, along with removing a number of the bulls' stop orders and a reverse test of 1.3751 from the bottom up can lead to forming an entry point into short positions in continuation of the bear market with the purpose of pulling down the currency to 1.3717, where I recommend taking profit. The next target will be the low of 1.3674. If the bears are not active in the resistance area of 1.3811, I recommend postponing short positions until the test of the 1.3870 high, or even higher - to the level of 1.3922, where you can open short positions immediately on a rebound, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) report June 22 shows that long positions have significantly declined while short positions have increased. The report showed changes in the market after the Federal Reserve's meeting on monetary policy. A similar meeting from the Bank of England, which took place last week, only exacerbated the situation. Many traders were counting on a more proactive stance on interest rates and the bond purchase program from the central bank. But as we already know, as long as no serious inflationary pressures are noticed in the UK, the Bank of England is unlikely to rush to make changes. The spread of the Indian strain of the coronavirus in the UK creates additional difficulties with the full opening of the economy, so traders also do not find reasons for the pound's growth. The economy may show more modest results for the second quarter of 2021. Despite this, the best scenario is to buy the pound for every good decline against the US dollar. The COT report indicates that long non-commercial positions fell from 55,203 to 51,445, while short non-commercial positions, on the contrary, rose sharply from 23,033 to 33,518. As a result, the non-commercial net position decreased from 32,170 to 17 972. Last week's closing price changed significantly and amounted to 1.3924 against 1.4109.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates a continued bear market.
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 lower border of the indicator in the area of 1.3745 will increase the pressure on the pound. A breakthrough of the upper border of the indicator in the area of 1.3810 will lead to a new wave of growth.
Description of indicators
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