To open long positions on GBP/USD, you need:
Several signals to enter the market were formed yesterday. Let's take a look at the 5-minute chart and analyze the entry points.
In my morning forecast, I drew attention to the resistance at 1.4115 and recommended making decisions exactly from this level. The wine is clear, as the bulls make their way above this area, and the bears are not even trying to be active there. As a result, there is a consolidation above this range, but only after a while do we see a normal signal to open long positions against the trend. The test of the level 1.4115 from top to bottom formed an excellent entry point, and the data on the US labor market led to a sharp rise in the pound to the resistance area of 1.4188, making it possible to take about 70 points of profit from the market.
In the second half of the day, after breaking through the resistance at 1.4152, I did not manage to enter the purchases, since it was just a little short before the reverse test of this level from top to bottom. However, by the middle of the American session, a false breakout was formed in the resistance area of 1.4188, after which you and I could observe a downward correction of the pair by about 30 points.
There is no important UK data today, so the market's entire focus will be on the analysis of Friday's US labor market report, which will continue to set direction. The initial task of buyers for the European session is to protect the support at 1.4117, which sellers are now targeting. The formation of a false breakout there will be the first signal to open long positions, counting on the continuation of the bull market, formed at the end of last week. In the absence of buying activity there, it is best to postpone long positions until the renewal of the minimum of 1.4085, from which the pair could be seen reversing last Friday. This level is a kind of lower border of a wide side channel, in which the pound has been for a long time. An equally important task for the bulls will be to regain control of the resistance at 1.4167. Only a consolidation at this level with its subsequent test from top to bottom will lead to the formation of a signal to open long positions with an exit to the maximum of 1.4197, where I recommend taking profits. The further target is the resistance at 1.4241.
To open short positions on GBP/USD, you need:
The primary task for the pound bears will be to break and test the 1.4117 area from below to the upside, which forms the entry point to short positions in the expectation of the continuation of the bear market observed last week. Such a scenario should bring GBP / USD back to the area of the minimum of 1.4085, where I recommend taking profits. It is hardly possible to count on a test of further support at 1.4041, since no important fundamental statistics are expected today, and no statements by the heads of central banks are planned. It is possible to say that buyers stopped the downtrend only after they regain control of the resistance at 1.4167. Therefore, the bears' priority is to protect this range. Formation of a false breakout there will be a signal to open short positions. In the scenario of the pound growing in the first half of the day and the absence of bears' activity in the 1.4167 area, it is best not to rush to sell: I advise you to postpone short positions until the 1.4197 maximum is renewed, from which you can sell the pound immediately on a rebound, counting on a downward correction of 20-25 points inside day. The next major resistance comes at 1.4241.
The Commitment of Traders (COT) reports for May 25 showed that short positions decreased while long ones increased. Recent statements by representatives of the Bank of England that now is the time to think about curtailing support measures and raising interest rates surprised many traders, but this returned the demand for the British pound, and due to this, it managed to pull up the currency to annual highs. The pound was also supported by the news that from June 21 this year, the UK economy will be fully open and all restrictive measures due to Covid will be canceled. This will be a good bullish boost for retail sales and inflation. The upward potential of the pound will remain quite high amid this background, you just need to wait a little. The COT report indicates that long non-commercial positions increased from 63,027 to 64,193, but short non-commercial positions sharply decreased from 38,127 to 33,534, which indicates profit-taking and the bears leaving the market, after unsuccessful attempts to turn the market to their side. This is another advantage for the bulls and those who believe in the continuation of the medium-term upward trend. As a result, the non-commercial net position increased from 24,900 to 30,659. The closing price of last week did not change significantly and reached 1.41553 against 1.41479.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates that there is no definite market direction.
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
If the pound rises, the upper border of the indicator in the area of 1.4185 will act as a resistance. The lower border of the indicator around 1.4117 can be used as a support.
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.
