To open long positions on GBP/USD, you need:
The British pound traded quite calmly on Friday, and the bulls easily held back all the bears' attacks, preparing a new offensive at the beginning of this week. In my Friday forecast, I drew attention to the level 1.3742 and recommended opening short positions from it. Let's take a look at the 5 minute charts: the breakthrough and test of this area from the bottom up formed a good entry point, but there was no major move to the downside. The fall was about 20 points and then the market regained balance. All this indicated the presence of large buyers, who then took over the market. Formation of a false breakout in the support area of 1.3750 in the afternoon did not lead to a good strengthening of the pound.
Today we do not have important fundamental reports on the UK, however, a speech by the member of the ILC of the Bank of England Gertjan Vlieghe is scheduled, who can tell market participants how he envisions the future of the central bank's monetary policy, which will lead to a surge in pound volatility. Statements about the need to curtail the bond purchase program will create a new wave of growth for the pair. The bulls are now focused on resistance at 1.3769, exceeding which will open the way to new local highs. A breakthrough and consolidation at this level with its reverse test from top to bottom will push the pound to new long positions and growth to areas: 1.3819 and 1.3859. The next target will be resistance at 1.3896, where I recommend taking profits. In case the pair falls after the statements of the representative of the Bank of England, the attention of the bulls will still remain on protecting support at 1.3722. The formation of a false breakout there will be a signal to open new long positions in continuation of the upward trend. If the bulls are not active in the 1.3722 area, it is best to postpone long positions until the 1.3672 low is renewed, but even there one can count on buying only if a false breakout is formed. I recommend buying GBP/USD immediately on a rebound only from a low like 1.3636, or even lower - around 1.3592, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The bears' initial task is to protect the resistance at 1.3769, above which the bulls did not break through last Friday. The formation of a false breakdown there during the speech of the representative of the Bank of England will certainly return pressure to the pound, which will form the first signal to open short positions in hopes that the pair would fall to the support area of 1.3722, which failed to break below last Friday. Only a breakthrough of this range and a test from the bottom up can hit the bulls' stop orders, which will push the pound to the next low of 1.3672, where I recommend taking profits. The next target is the area of 1.3636. If the bears are not active in the 1.3769 area, I recommend postponing short positions until the next major resistance at 1.3819, or selling GBP/USD immediately after a rebound from 1.3859, counting on a downward correction of 25-30 points within the day.
I recommend for review:
The Commitment of Traders (COT) report for July 13 recorded a sharp decline in long positions and a slight increase in short ones. This suggests that US inflation has influenced the sentiment of the bulls in a negative direction. The fact that representatives of the Bank of England have recently been reluctant to talk about plans to cut the bond purchase program once again proves their cautious stance on this issue. The UK government completely canceled all quarantine restrictions on July 19 this year, but according to the latest figures on the incidence in the country of the new Delta coronavirus strain, this won't take long. Undoubtedly, after each major downward movement of GBP/USD, traders show particular interest, as sooner or later the central bank will talk about curtailing support measures for the economy, which will have a positive impact on the British pound and lead to its growth. But as long as it does not severely stray away from the UK inflation target, then the Bank of England is unlikely to rush to make changes to its policy. Despite this, the best scenario is to buy the pound for every good decline against the US dollar. The COT report indicated that long non-commercial positions declined from 57,232 to 44,686, while short non-commercial positions rose from 35,329 to 36,717. As a result, the non-commercial net position decreased to 7,969 from 21,903 The closing price of the last week increased slightly and amounted to 1.3886 against 1.3853.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates a sideways market with a slight advantage of the bulls.
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
Surpassing the upper border of the indicator in the area of 1.3769 will lead to a new wave of growth for the pound. A breakthrough of the lower border of the indicator around 1.3730 will increase the pressure on the pair.
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.
