To open long positions on GBP/USD, you need:
The British pound generated several signals to enter the market yesterday, but given the volatility after the Bank of England announced its decision on interest rates, and the uncertainty of traders, all this led to another unsuccessful attempt to build the upward momentum. In my review for the second half of the day, I paid attention to the breakout and consolidation above the 1.3143 level and recommended opening long positions from it in case this range was tested. And so it happened. However, the movement did not pull more than 30-35 points. Then, a signal to sell the pound formed during the US session. On the 5-minute chart, we see how the pair returns to the support range of 1.3143 and tests it from the bottom up, creating a good selling point. But even from there, the first wave of decline did not bring 25 points. From the 1.3143 level, there was a larger movement of GBP/USD down to the support area of 1.3065 during the Asian session, which the pair is now aiming for. At the moment, buyers need to protect this range. From there, you can open long positions immediately for a rebound in anticipation of a correction of 30-40 points within the day. If the pound does not rapidly move up from this area, and the price begins to slowly slide back to the support area of 1.3065, it is best to abandon long positions before updating the low of 1.2980. How the market will react to the US labor market data remains a mystery. In case the pound grows in the morning, it will be possible to talk about continuing the bullish trend only after consolidating above the resistance of 1.3181, which will open a direct road to the highs of 1.3228 and 1.3265.
Let me remind you that the Commitment of Traders (COT) report for July 28 recorded another increase in short positions, but long positions were seriously reduced. This suggests that there are more and more bears and also confirms the theory that the pound's strength is only based on the US dollar's weakness and sooner or later, everything will end, which will lead to a sharp decline in the pair, as the problems with Brexit and uncertainty about the prospect of economic recovery have not gone away. The COT report indicates that short non-commercial positions increased from the level of 61,310 to the level of 64,738 during the week. On the contrary, long non-commercial positions decreased from the level of 46,230 to the level of 39,392. As a result, the non-commercial net position increased its negative value to -25,409, against -15,080, which indicates the likelihood of a sharp fall in the pound after the US dollar recovers its strength.
To open short positions on GBP/USD, you need:
Sellers were convinced that the Bank of England's latest decision creates pressure on the British pound, since the central bank did not announce expansion measures to support the economy. Now their task is to return to the 1.3065 level, consolidating under which forms a good signal to open short positions in the area of the low of 1.2980, where I recommend taking profits. In case the pound grows in the morning, you can return to short positions on a rebound from the weekly high of 1.3181 in anticipation of a correction of 30-40 points within the day. If buyers are not active in this range, I advise you to postpone short positions until the new highs around 1.3228 and 1.3265 are updated.
Trading is carried out just below 30 and 50 moving averages, which indicates an attempt by the bears to take control of the market.
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.
A breakout of the upper border of the indicator at 1.3181 will lead to a new wave of growth in the pound. A break of the lower border of the indicator in the 1.3110 area will increase the pressure by the pound.
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) Fast EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial traders are speculators, 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.
- The total non-commercial net position is the difference between short and long positions of non-commercial traders.