To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to the level of 1.3958 and recommended making decisions based on it. First, let's look at the 5-minute chart. Weak PMI data did not become a problem for buyers, as everyone believes in a rapid recovery of the UK economy in the summer. It is clear to see how the bulls achieve a breakout of this range on the first attempt, and after the reverse test from top to bottom, an excellent signal is formed to buy the pound. At the time of writing, the upward movement was about 30 points.
Now buyers are focusing all their attention on the new resistance of 1.4007, to which they have very little time left. A breakout and a test of this level from top to bottom can form a new entry point into long positions to continue the pound's growth. Buyers will be happy to follow the sellers' stop orders and drive the pair even higher to the resistance of 1.4047, where I recommend taking the profits. A further target will be a maximum of 1.4097. In the scenario of strong PMI data and a decline in the pound, a more optimal scenario for opening long positions will be a downward correction to the support area of 1.3958, which the bulls managed to win back today. The formation of a false breakout will be another proof of a new bullish trend for the pound. If the bulls do not show themselves in the area of 1.3958, I recommend opening long positions for a rebound from the low of 1.3907 to move 20-25 points inside the day.
To open short positions on GBP/USD, you need to:
Now sellers need to think about how to protect the resistance of 1.4007. The formation of a false breakout in the second half of the day, together with strong data on manufacturing activity and activity in the US services sector, will be an excellent signal to open short positions in the expectation of a downward correction after such a large increase in the pound this week. In this case, we can also think about a return to the support of 1.3958, for which a real struggle will unfold since this level is decisive in the short-term direction of the pair. A break and consolidation below 1.3958 will hit the stop orders of buyers, which will lead to a fall in GBP/USD and a test of the minimum of 1.3907, where I recommend taking the profits. If the bears do not show any activity in the area of 1.4007, then I advise you to sell the pound only for a rebound from the larger local high of 1.4047 or even higher – from the level of 1.4097, based on a downward correction of 20-25 points within the day.
In the COT reports (Commitment of Traders) for June 15, a sharp reduction in both long and short positions was recorded. However, this did not negatively affect the positive delta. On the contrary, it even increased due to a larger reduction in the positions of sellers. The data was collected before the publication of the Federal Reserve's decision on monetary policy, so I recommend not to pay much attention to them since the picture is already different. Good inflation in the UK will continue to create some pressure on the Bank of England, but so far, the British regulator has no reason to panic, as it is happening in the US. This week, the Central Bank will hold a meeting where everything will remain unchanged, leading to continued pressure on the British pound and continuing its decline against the US dollar in the short term.
The same type of statements from the Bank of England representatives no longer work, so the market will only respond to new guidelines for monetary policy. An important moment for the pound will also 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 on the state's 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 59,238 to 55,203, while short non-profit positions fell much more strongly — from the level of 31,524 to the level of 23,033. As a result, the non-profit net position increased from 27,714 to the level of 32,170. The closing price of last week changed significantly and amounted to 1.4109 against 1.4175.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 moving averages, which indicates an attempt by the bulls to continue the upward trend in the pair.
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:
The growth will be limited in the area of the upper level of the indicator 1.4230. If the pair falls, the lower limit of the indicator around 1.4130 will provide 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.
