To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3835 and recommended making decisions from it. Let's look at the 5-minute chart and talk about what happened. It is visible how buyers very quickly occupy this level, forming a false breakdown from it and a signal to open long positions. The first upward movement was about 35 points, after which the bulls rested on the resistance of 1.3869. A false breakout was formed, so it was safe to open short positions. As a result, we saw a downward movement of 15 points, after which the buyers regained control over the pound.
In the afternoon, everything will be entirely in the hands of the Chairman of the Federal Reserve System. The further direction of the US dollar depends on his statements. The ideal option for buyers of the pound will be the formation of a false breakdown at the level of 1.3869. Its protection forms a signal to open long positions in the hope of recovering to the resistance of 1.3909, above which buyers failed to break through at the beginning of this week. The breakthrough of 1.3909 will be realized in the case of Powell's wait-and-see attitude towards inflation. A test of this area from top to bottom will form a new buy signal for GBP/USD and will open a direct road to the maximum of 1.3938. The longer-term target remains the resistance of 1.3978. If the pressure on GBP/USD returns in the afternoon, and the bulls will not be able to offer anything in the support area of 1.3869, it is best to postpone long positions until the level of 1.3835 is updated or buy GBP/USD immediately for a rebound, counting on an upward correction of 25-30 points within the day from the minimum of 1.3802.
To open short positions on GBP/USD, you need:
The initial task of the bears is now to protect the resistance of 1.3903, which buyers have already targeted. The formation of a false breakdown during the speech of the Fed chairman forms a good signal for the sale of the pound, which will push the pair to the support of 1.3869. Its breakdown will lead to the demolition of several buyers' stop orders and will collapse GBP/USD to a minimum of 1.3835, where I recommend fixing the profits. A more distant target will be the area of 1.3802, but such a large drop in the pound can be counted on in case of real concern for Powell for inflation in the United States, which is unlikely. In the absence of active actions of sellers in the area of 1.3903, I recommend postponing sales until the test of a larger resistance of 1.3938, where you can open short positions immediately for a rebound based on a downward correction of 25-30 points within the day. The next major resistance is seen in the area of 1.3978.
The COT reports (Commitment of Traders) for July 6 recorded an increase in both long and short positions, which led to an increase in the net position. Despite the weak fundamental data on the UK GDP growth rate in May this year, the pound continues to be in demand after the correction that was observed during the June meeting of the US Federal Reserve System. Now, after a major movement of GBP/USD down, traders are showing special interest, and the May data is not an obstacle to building up long positions, as everyone is waiting for more active economic growth in the summer period, even despite the Indian strain of coronavirus. However, the growth of the pound may be limited not only due to a sharp increase in the incidence of diseases in the summer but also the fact that the British regulator will not rush to change the bond purchase program is also a deterrent to the upward trend. While serious inflationary pressure in the UK will not be noticed, the Bank of England is unlikely to rush to make changes to its policy. Despite this, the optimal scenario is to buy the pound with each good decline in a pair with the US dollar. The COT report indicates that long non-commercial positions increased from the level of 51,596 to the level of 57,232, while short non-commercial positions increased from the level of 33,873 to the level of 35,329. As a result, the non-commercial net position increased to 21,903 against 17,723. The closing price of last week decreased and amounted to 1.3853 against 1.3878.
Signals of indicators:
Moving averages
Trading is already above 30 and 50 daily averages, which indicates an attempt by the bulls to take over the market.
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
In case of a decline in the pair, the lower border of the indicator in the area of 1.3790 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 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 the short and long positions of non-commercial traders.
