In my morning forecast, I paid attention to the level of 1.2091 and recommended deciding on entering the market. Let's look at the 5-minute chart and figure out what happened there. The pound buyers failed to gain a foothold above 1.2091 on the first attempt, and a return to this level gave a sell signal. Unfortunately, I did not see a normal downward movement continuing Friday's trend. On the second attempt, the bulls took 1.2091, and the reverse test from top to bottom of this level gave a signal to open long positions. The pair has already gone up more than 25 points at the time of writing.
To open long positions on GBP/USD, you need:
While trading will be conducted above 1.2091, we can count on a larger pound spurt to the nearest resistance area of 1.2145, from which everything will fall on Friday and last. In the event of a decline in GBP/USD in the afternoon, which also cannot be ruled out since fundamental statistics for the US are not planned. The optimal scenario for buying will be another false breakdown in the nearest support area of 1.2091. In this case, you can count on another attempt to update the daily maximum and on a new spurt of the pair up to 1.2145. A breakdown of this level will open the way to 1.2192. A more distant goal will be the maximum of this month's 1.2237, where I recommend fixing the profits. If GBP/USD falls and there are no buyers at 1.2091, the pressure on the pound will seriously increase, forcing the bulls to take profits against the background of the low trading volume. If this happens, I recommend postponing long positions until 1.2048. I advise you to buy there only on a false breakdown. It is possible to open long positions on GBP/USD immediately for a rebound from 1.2005 or even lower – around 1.1964 with the aim of correction of 30-35 points within a day.
To open short positions on GBP/USD, you need:
After Friday's collapse of the pair with new sales of the pound, it is becoming more and more difficult, so be careful and keep an eye on the level of 1.2145 – the nearest resistance, where in my opinion, growth is limited today. The optimal scenario for opening short positions will be a false breakdown in the area of 1.2145, which will return pressure on the pound to reduce to the nearest support of 1.2091, missed during European trading. The bears need to close the day below this level – if they plan to continue to put pressure on the pound, of course. A breakthrough and a reverse test from the bottom up of 1.2091 will give an entry point for sale with a fall to 1.2048, and a further target will be the 1.2005 area, where I recommend fixing the profits. With the option of GBP/USD growth and the absence of bears at 1.2145 in the afternoon, the bulls will have a real chance to save the situation and complete the bearish correction of the uptrend formed on July 14. In this case, I advise you not to rush with sales: only a false breakdown in the area of 1.2192 will give an entry point to short positions in the expectation of a rebound of the pair. If there is no activity, there may be a jerk up to the maximum of 1.2237. Short positions from 1.2237 can be opened immediately for a rebound based on the pair's movement down by 30-35 points within the day.
The COT report (Commitment of Traders) for July 26 recorded a reduction in short positions and a sharp increase in long ones, which coincides with what we are currently seeing in the market. The British pound is in active demand, and there is no doubt that the Bank of England will continue to raise interest rates this month. The aggressive policy of the regulator has a positive effect on the British pound, even though the economy is not in the best condition. The decision of the US Federal Reserve last week to raise interest rates in the fight against high inflation will affect the future decision of the Bank of England. However, it is worth saying that the demand for the pound is not as serious as it might seem. The upward movement of GBP/USD is taking place against a weakening dollar, as traders have received a clear signal that the US Central Bank may soften its interest rate hikes in the fall. But even against this background, it is not rational to wait for a further bull market for the pound, given the cost-of-living crisis in the UK and the economy gradually slipping into recession. The COT report indicates that long non-commercial positions increased by 2,663 to 34,606. In contrast, short non-commercial positions decreased by 597 to the level of 88,596, which led to a decrease in the negative value of the non-commercial net position to the level of 53,990 from the level of -57,250. The weekly closing price rose to 1.2043 against 1.2013.
Signals of indicators:
Moving Averages
Trading is conducted around the 30 and 50-day moving averages, which indicates market uncertainty.
Note: The author considers the period and prices of moving averages on the hourly chart H1 and differs from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
In the case of a decline, the lower limit of the indicator around 1.2048 will act as 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 use the futures market for speculative purposes and to 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.
