To open long positions on GBP/USD, you need:
Last Friday morning, I paid attention to the level 1.4156 and advised you to make a decision on entering the market. Let's take a look at the 5 minute chart and talk about what ultimately happened. In the first test, the bulls defended the 1.4156 level and formed a false break there, which led to an excellent buy signal to continue the bullish trend that was observed yesterday. However, the pair did not go up immediately, and after a while the bears achieved the removal of stop orders below this level, including mine, and retreated from the market. Weak data on the UK GDP did not allow the buyers of the pound to continue the upward trend.
Then the bulls regained control over the 1.4156 level and even tested it from top to bottom, which resulted in creating a signal to open long positions. However, it was not possible to achieve a large uptrend there, and the second half was completely under the control of sellers. Another return below the 1.4156 area did not allow entering short positions, as the reverse test of this level from the bottom up did not take place.
Today, closer to lunchtime, Bank of England Governor Andrew Bailey will speak, but his statements are unlikely to have any significant impact on the direction of the pair. The initial task of the bulls for the European session will be to protect the support at 1.4086, which is also the lower border of the wide horizontal channel, in which the pound has been for quite a long time. Forming a false breakout there, until the level of 1.4076 is updated, will be the first signal to open long positions in the expectation of the pair recovering to the resistance area of 1.4125. Moving averages, playing on the side of the bears, are just above this area. A breakthrough and consolidation above the level of 1.4125 will open a direct path to the resistance at 1.4162, and then to the upper border of the side channel 1.4196, where I recommend taking profits. If GBP/USD drops to the 1.4086 area and there is no buying activity there, then it is best to postpone long positions until the 1.4041 low has been renewed. I also recommend opening long positions immediately on a rebound from the level of 1.4008 with the aim of an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The bears have one task now - a breakthrough and consolidation below the support of 1.4086. Only a test of this level from the bottom up will indicate the formation of a real entry point into short positions, which will allow GBP/USD to get out of the horizontal channel, in which the pair has been trading for about a month. In this scenario, the bears will aim at the support at 1.4041, and the base of the 40th figure - 1.4008, where I recommend taking profits, will act as a further level. However, the opportunity to get to these lows will appear only after Bailey's statements on the subject of monetary policy. There are no other reasons for such an active fall of the pound yet. If GBP/USD grows in the first half of the day, the bears will need to think carefully about protecting the resistance at 1.4125, just above which the moving averages play on their side. Forming a false breakout there generates a signal to open short positions with the aim of further downward correction of the pair. If the scenario of GBP/USD growth in the first half of the day and the absence of activity on the part of sellers at 1.4125, I advise you to postpone short positions until the resistance test at 1.4162, or even higher - until the upper border of the side channel 1.4196 is updated, 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 1 showed a slight increase in long positions and a very large growth in short ones, which was evidence of a sharp fall in the pound. The statements of the Bank of England representatives no longer work, as market participants need concrete actions, not promises. Until they are present, it will be very difficult for the bulls to surpass new local highs. The risk of a later opening of the UK economy due to the spread of the Indian strain of the coronavirus also poses a number of disincentives for the bulls. However, as soon as the central bank starts to take inflation seriously and talk about changes in the volume of the asset purchase program, the demand for GBP/USD will immediately return. Therefore, the optimal scenario is buying everytime there is a good decline in the British pound against the US dollar. The COT report indicated that long non-commercial positions rose from 64,193 to 64,204, while short non-commercial positions rose much stronger from 33,534 to 40,079, which indicates the emergence of new bears in the market after a couple of regular local highs. As a result, the non-commercial net position decreased from the level of 30,659 to the level of 24,125. The closing price of the last week changed and amounted to 1.42270 against 1.41553.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates an attempt by bears to go beyond the lower border of the horizontal channel.
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
Growth will be limited by the upper level of the indicator around 1.4145. A breakthrough of the lower border of the indicator in the area of 1.4086 will increase the pressure on the pair.
I recommend for review:
I recommend that you familiarize yourself with the COT report and the forecast of the GBPUSD pair for today
The EU-UK wars have been postponed until June 30. ECB meeting
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain 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 short and long positions of non-commercial traders.
