To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3927 and recommended making decisions based on it. Let's look at the 5-minute chart. The decision of the Bank of England to completely leave monetary policy unchanged led to a sharp drop in the British pound in the first half of the day and a breakdown of the support of 1.3927. Its reverse test formed an excellent signal to open short positions in the expectation of forming a downward correction after the bull market observed this week.
Buyers of the pound now need to regain control over the level of 1.3927 in the second half of the day. The current fall of the pound can be considered the demolition of several stop orders of speculative players. The return of control over the level at the end of the day can also lead to a further increase in GBP/USD to the highs of 1.3996 and 1.4047, where I recommend fixing the profits. A more distant target for the end of the week will be the level of 1.4097. If the bulls fail to regain the market position, it is best to open long positions to rebound from the low of 1.3863, or even lower - from the level of 1.3803 to move 25-30 points inside the day.
To open short positions on GBP/USD, you need:
While trading will be conducted below the level of 1.3927, the pressure on the pound will remain, and the bears can count on a further downward correction to the area of the minimum of 1.3863. Larger support is seen in the area of 1.3803, where I recommend taking the profits. In the scenario of weak fundamental data on the US labor market and the absence of hints in the statements of the Federal Reserve System representatives on the need to curtail the bond purchase program, all this may lead to a return of the pair to the level of 1.3927. In this case, I do not recommend rushing with long positions. The optimal scenario will be selling on a false breakout from the morning resistance of 1.3996. I advise you to open short positions immediately for a rebound only from a new local maximum in the area of 1.4047, based on a downward correction of 25-30 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for June 15 recorded a sharp reduction in both long and short positions. However, this did not negatively affect the positive delta. However, on the contrary, it even increased due to a larger reduction in sellers' positions. The data was collected even before the publication of the Federal Reserve's decision on monetary policy, so I recommend not paying 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. However, 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 fall against the US dollar in the short term. Similar statements by representatives of the Bank of England no longer work. Thus, the market will react only to new guidelines regarding 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 remains purchases for every good decline of the British pound against the US dollar. The COT report indicates that long non-commercial positions fell from the level of 59,238 to 55,203, and short non-commercial positions fell much more strongly — from the level of 31,524 to the level of 23,033. As a result, the non-commercial net position increased from the level of 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 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 near the upper level of the indicator 1.4230. If the pair falls, the lower border 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.
