To open long positions on GBP/USD, you need to:
Sellers did everything to return the pressure on the British pound. However, the data on inflation in the UK completely canceled their plans. Let's look at the 5-minute chart and talk about what the entry points were formed. It is seen how the formation of a false breakout in the resistance area of 1.4097 forms an excellent signal to open short positions, which leads to a slight decline in the British pound in the first half of the day. However, strong UK inflation data brought buyers back to the market, which led to a breakout and a rise above the resistance of 1.4097. Its reverse test from top to bottom formed an excellent entry point into long positions to continue the upward trend. At the time of writing, the pair went up about 20 points. Those who were waiting for an accurate test of the level of 1.4097 missed the purchase, as one point was missing before the level update.
For buyers, a lot will depend on what will be the outcome of the Federal Reserve's monetary policy meeting. You can read here for more information about what decisions can be made and how they will affect the market. Let's talk about the technical picture for the afternoon. The release of weak fundamentals for the US economy will increase the pound in the resistance area of 1.4128. A breakdown and consolidation above this level with a reverse test from top to bottom will form an additional signal to open long positions to continue the upward correction in the area of the maximum of 1.4156. A more distant target will be the resistance of 1.4188, where I recommend taking the profit. An equally important task for the bulls will be to protect the support of 1.4097. The formation of a false breakout forms a signal to open long positions on the pound. Suppose there is no activity at this level in the second half of the day. In that case, it is best to buy GBP/USD immediately for a rebound from the support of 1.4067 or even lower – around 1.4037 – in the expectation of an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need to:
In the second half of the day, the bears will try to hold the level of 1.4128. The formation of a false breakout, together with strong data on the volume of construction permits issued and the number of new foundations laid in the United States, will return pressure on the pound, which will push it to the intermediate support of 1.4097, from which the pair's growth was observed today. A break and a test of this level from the bottom up will push GBP/USD to the day's low of 1.4067, where a more fierce struggle will unfold. A breakthrough of this level will occur if there are changes in the policy of the Federal Reserve System. But we won't know about this until the evening. Suppose sellers prefer to miss the resistance of 1.4128. In that case, it is best to abandon short positions until the next level of 1.4156 is updated or sell GBP/USD immediately on a rebound from the upper limit of the wide side channel of 1.4188 in the expectation of a downward correction of 20-25 points within the day.
In the COT reports (Commitment of Traders) for June 8, a reduction in both long and short positions was recorded. However, this did not negatively affect the positive delta. However, on the contrary, it even increased due to a larger reduction in sellers' positions. It indicates the presence of a sufficiently large interest of buyers with each decline in the pound. The same type of statements by representatives of the Bank of England no longer work, and the market reacts rather weakly even to the speeches of Governor Andrew Bailey. Without real changes and adjustments to the bond-buying program by the Central Bank, it will be quite difficult for the British pound to get out of the side channel in which it has been for almost one month.
An important point will be the full opening of the UK economy, which is scheduled for the 20th of this month. The spread of the Indian strain of coronavirus in the territory creates several obstacles to this, which affects the desire of investors to buy the British pound. The optimal scenario is to buy at every good decline in the British pound against the US dollar. The COT report shows that long non-profit positions fell from the level of 64,204 to 59,238, while short non-profit positions fell much more strongly from the level of 40,079 to the level of 31,524. As a result, the non-commercial net position increased from the level of 24,125 to the level of 27,714. The closing price of last week changed significantly and amounted to 1.41757 against 1.42270.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily averages, which indicates an attempt by buyers to take control of the market.
Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
In the case of a decline in the pair, the average border of the indicator in the area of 1.4060 will act as support.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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 the short and long positions of non-commercial traders.
