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To open long positions on GBP/USD, you need:
Yesterday morning, I paid attention to the 1.3833 level and recommended making decisions based on it. Let's take a look at the 5 minute chart and talk about what happened. You could clearly see how the pair is gradually sliding to the support area of 1.3833, however, before the renewal of this range and a false breakout forming on it, literally 2-3 points were not enough. For this reason, I did not open long positions in the pound during the European session. The UK lending report did not particularly surprise traders.
The second half of the day was much more interesting than the first. The bears tried to add pressure on the 1.3833 level, testing it from the bottom up, which resulted in creating a signal to open short positions. After that, strong data on the indicator of consumer confidence pushed the pound even lower by 20 points and the move ended there. At the end of the day, the bulls managed to recapture the 1.3833 area, which retains the chance for an upward correction.
Today there is a rather important report on the state of the UK economy, which may set the direction for the pound in the second half of this week. If the data beats economists' forecasts, it will remind traders of the strength of the economy and its pace of recovery in the second quarter of this year. Therefore, the main task is to break through and settle above the resistance of 1.3870, where the moving averages, playing on the side of the bears, pass. A reverse test of this level from top to bottom will generate a buy signal and open a direct road to the 1.3922 area, where I recommend taking profits. The next target will be the high at 1.3978, but it will not be so easy for the bulls to reach it. If the pressure on the pound persists in the first half of the day, and the GDP report does not turn out to be pleasing, we might see the pair fall to the 1.3817 area. Forming a false breakout at this level generates a signal to open long positions, counting on a reversal of the bear market. If the bulls are not active in the 1.3817 area and GBP/USD falls further, it is best to postpone long positions until the 1.3770 low is renewed, where I recommend buying the pair immediately on a rebound, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The initial task of the bears is to protect the resistance at 1.3870, which was formed at the end of Tuesday and where the moving averages are, which plays an important direction in the market movement. Forming a false breakout there will be a signal to sell the pound, which will push the pair back to the support of 1.3817, which will have to be fought for very seriously. A breakthrough of this range and a reverse test from the bottom up can occur only in case we receive disappointing fundamental reports on the UK economy, which will lead to forming an entry point into short positions in continuation of the bear market as we aim to pull down the pair to the 1.3770 area, where I recommend taking profits. The next target will be the low of 1.3717. If the bears are not active in the resistance area of 1.3870 and we receive a good report on GDP, then I recommend postponing short positions until the test of the high at 1.3922, or even higher - to the level of 1.3978, where you can open short positions immediately on a rebound, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) report June 22 shows that long positions have significantly declined while short positions have increased. The report showed changes in the market after the Federal Reserve's meeting on monetary policy. A similar meeting from the Bank of England, which took place last week, only exacerbated the situation. Many traders were counting on a more proactive stance on interest rates and the bond purchase program from the central bank. But as we already know, as long as no serious inflationary pressures are noticed in the UK, the Bank of England is unlikely to rush to make changes. The spread of the Indian strain of the coronavirus in the UK creates additional difficulties with the full opening of the economy, so traders also do not find reasons for the pound's growth. The economy may show more modest results for the second quarter of 2021. Despite this, the best scenario is to buy the pound for every good decline against the US dollar. The COT report indicates that long non-commercial positions fell from 55,203 to 51,445, while short non-commercial positions, on the contrary, rose sharply from 23,033 to 33,518. As a result, the non-commercial net position decreased from 32,170 to 17 972. Last week's closing price changed significantly and amounted to 1.3924 against 1.4109.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates that the bear market will continue.
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 1.3875 will lead to a new wave of growth for the pound. A breakthrough of the lower border of the indicator around 1.3820 will increase the pressure on the pound.
Description of indicators
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