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To open long positions on GBP/USD, you need:
Yesterday, quite a lot of signals were formed to enter the market. Let's look at the 5-minute chart and sort them all out. I paid attention to the level of 1.3743 in my morning forecast, where I recommended entering the market. The instant breakthrough of the 1.3743 support did not allow us to create a good entry point into short positions, since this level was not tested on reverse from the bottom up. Forming a false breakout in the area of 1.3717 resulted in creating a good entry point into long positions, but before going up by 30 points, there was a removal of stop orders (including mine) below the support of 1.3717, so this signal brought losses. The short position from the resistance of 1.3743 allowed us to compensate for the losses and at the time of writing, the pressure on the pound was only increasing.
In the second half of the day, the bulls actively defended support at 1.3703, having formed several false breakouts on it and an excellent signal for the pound to recover, but it did not sharply rise. After settling below 1.3703, the bears began to be more active, having formed a signal to open short positions, which pushed the pound to fall by 30 points to the 1.3674 area.
Before talking about further prospects for the GBP/USD movement, let's see what happened in the futures market. The Commitment of Traders (COT) report for July 13 recorded a sharp decline in long positions and a slight increase in short ones. This suggests that US inflation has influenced the sentiment of the bulls in a negative direction. The fact that representatives of the Bank of England have recently been reluctant to talk about plans to cut the bond purchase program once again proves their cautious stance on this issue. The UK government completely canceled all quarantine restrictions on July 19 this year, but according to the latest figures on the incidence in the country of the new Delta coronavirus strain, this won't take long. Undoubtedly, after each major downward movement of GBP/USD, traders show particular interest, as sooner or later the central bank will talk about curtailing support measures for the economy, which will have a positive impact on the British pound and lead to its growth. But as long as it does not severely stray away from the UK inflation target, then the Bank of England is unlikely to rush to make changes to its policy. Despite this, the best scenario is to buy the pound for every good decline against the US dollar. The COT report indicated that long non-commercial positions declined from 57,232 to 44,686, while short non-commercial positions rose from 35,329 to 36,717. As a result, the non-commercial net position decreased to 7,969 from 21,903 The closing price of the last week increased slightly and amounted to 1.3886 against 1.3853.
The UK will not release important fundamental reports today, nor are there even any central bank speakers that are scheduled to speak. Therefore, it is possible that against this background, the bulls will be able to find strength and correct the situation with the pound's fall at the beginning of this week. But, before counting on growth, most likely the bulls will have to defend the support at 1.3662, which was formed at the end of yesterday and which keeps the British pound from a sharp sale below the March lows. Forming a false breakout there generates a signal to open long positions in hopes that the pair would recover to resistance at 1.3693, above which the moving averages that play on the bears' side pass. An important challenge for the bulls is to regain control of this resistance. A breakthrough and consolidation at 1.3693, followed by its test from top to bottom, can create another signal to open long positions in hopes that the pair would recover to 1.3721 and 1.3758, where one can observe how active the bears are in continuing the downward trend. If the pressure on the pair persists this morning, and the bulls will not be able to offer anything in the support area of 1.3661, in this case, I recommend not to rush into long positions. The optimal scenario would be buying from the next support at 1.3636 against the bearish trend. Therefore, I recommend opening long positions there only if a false breakout is formed. I advise you to watch buying GBP/USD immediately for a rebound only from a low like 1.3605, counting on an upward correction of 25-30 points within the day. But remember, when opening long positions against the trend, you are trying to find the low of the market, and using this method to trade without stop orders is very risky.
To open short positions on GBP/USD, you need:
The bears don't need to do much to keep the market under their control. It is enough for them to regain control over the support level of 1.3662. Surpassing this area and a reverse test of it from the bottom up can create a new signal to open short positions in continuation of the downward trend with the prospect of reaching lows like 1.3636 and 1.3605, where I recommend taking profits. The 1.3566 level would be the next target, the test of which will be another proof of a powerful downward trend. The pound's growth in the first half of the day while there are no fundamental reports and is done purely for a technical correction is quite possible. Therefore, it is best not to rush into short positions. Forming a false breakout in the resistance area of 1.3693 will be a signal to sell GBP/USD. I recommend opening short positions in the pound immediately on a rebound only from a larger resistance in the area of 1.3721, or even higher - in the area of 1.3758, counting on the pair's rebound down by 20-25 points within the day.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates that the pound could continue to fall in the short term.
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
In case the pound falls, the lower border of the indicator in the area of 1.3636 will act as a support. In case of growth, the upper border at 1.3721 will act as a resistance.
Description of indicators
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