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To open long positions on GBP/USD, you need:
Yesterday, all attempts by the bears to somehow stop the downward trend were especially unsuccessful.
If you look at the 5-minute chart, you will see how the bulls defend the support at 1.3972 with all their might in the first half of the day, forming a false breakout there several times, which leads to a signal to buy the pound. If the market did not have such an obvious bearish character, then, quite possibly, the signal would have worked itself out. But no matter how the bulls tried, the bears still failed this level, continuing to push the pound lower and lower.
In my forecast for the afternoon, I paid attention to the level of 1.3921 and recommended to open long positions from it, provided a false breakout was formed, which happened. The upward rebound was about 35 points, after which the pressure on the pair returned again and by the end of the day the bears took control over this level as well.
Important data on the UK will be released today, so the focus will be on the retail sales report, which may put pressure on the British pound and push it towards the big support at 1.3888. That is why the primary concern of bulls is to protect this range. Forming a false breakout there creates the first signal to open long positions in order to restore GBP/USD to the resistance area of 1.3938. A breakthrough and consolidation above this level with a reverse test from top to bottom will open a direct road to the 1.3993 area, where the moving averages that play on the side of the bears pass. I recommend taking profit there. With a decline to the 1.3888 area and if the bulls are not active there, which is likely, given the bear market we are currently witnessing, then it is best to postpone long positions until the 1.3839 low has been updated. The only thing that the bulls can count on in case we receive a disappointing report on the UK would be divergence, which is now forming on the MACD indicator and also limits the pair's downward potential in the short term. It is also possible to buy the pound immediately upon a rebound from the level of 1.3799 with the aim of an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The bears have one task - a breakthrough and consolidation below the support of 1.3888. A breakthrough and reverse test from the bottom up of this level will indicate the formation of a new entry point into short positions and will allow GBP/USD to get to new local lows of 1.3839 and 1.3799, where I recommend taking profits. Weak UK data may help implement this scenario, but one should not forget about the divergence, which is now forming on the MACD indicator and the end of the week, when traders can take profits on short positions. Therefore, selling on the breakthrough of the next local lows will be a very dangerous business. It is best to wait for the GBP/USD to recover to the resistance area of 1.3938 in the first half of the day and open short positions from there after forming a false breakout. If the bears are not active, then I recommend postponing short positions until the test of the larger area of 1.3993, where you can sell the pound immediately on a rebound, counting on a downward correction of 20-25 points within the day. Moving averages that play on the side of the bears also pass in this range.
The Commitment of Traders (COT) reports for June 8 showed that both long and short positions decreased, but this did not negatively affect the positive delta, but on the contrary, it even increased due to a larger reduction in sellers' positions. This indicates the presence of a fairly large interest of buyers with each decline in the pound. Similar statements from representatives of the Bank of England no longer work, and the market reacts rather weakly even to the speeches of Governor Andrew Bailey. Without real changes and adjustments to the bond buying program by the central bank, it will be quite difficult for the British pound to get out of the horizontal channel, in which it has been in for almost a month. An important moment will be the full opening of the UK economy, which is scheduled for the 20th of this month. The spread of the Indian strain of the coronavirus in the territory creates a number of obstacles to this, which affects the desire of investors to buy the British pound. The best scenario is to buy for every good decline in the British pound against the US dollar. The COT report indicated that long non-commercial positions fell from 64,204 to 59,238, while short non-commercial positions fell much more strongly from 40,079 to 31,524. As a result, the non-commercial net position rose from 24,125 to 27,714. Last week's closing price changed significantly and amounted to 1.41757 against 1.42270.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates a bear market and a possible succeeding decline for the pound.
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
In case of an upward correction, the upper border of the indicator in the area of 1.3940 will act as a resistance. A breakthrough of the lower border of the indicator in the area of 1.3888 can push the pound to fall.
Description of indicators
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