To open long positions on GBP/USD, you need:
It seems that the British pound has a lot more problems than it seemed. After recent conversations related to weak inflation, as well as after the data on the consumer price index, which, by the way, slowed down, trade among bulls of the pound has gone completely wrong. Quite a lot of signals to enter the market were formed yesterday. Let's take a look at the 5-minute chart and talk about where you could make money. In the first half of the day, the breakthrough and reverse test of the 1.3706 low resulted in forming an excellent entry point to short positions, which triggered a large sell-off of the pound to the 1.3672 area. Closer to the middle of the day, a false breakout was formed there, thereby creating a buy signal, which showed an increase of 30 points. A similar point for opening long positions was formed during the US session, but there the growth was about 20 points. Then the bears broke through the level of 1.3669 and the market rolled down further.
Today we have important data on retail sales in the UK, which could be the "final chord" in this downward trend, observed all week. If traders are disappointed with the report, then the bulls are unlikely to be able to offer anything, but you need to try in any case. I do not recommend rushing with long positions against the trend even in the area of new lows. The optimal scenario would be buying from the level of 1.3619, but only if a false breakout is formed there, which generates a signal to buy GBP/USD, while aiming for an upward correction to resistance at 1.3653. Above this range, there are moving averages that play on the side of bears, which will limit the pair's upward potential. The breakthrough and test of 1.3653 from top to bottom will create another signal to buy GBP/USD in hopes of a return to 1.3691, and this will become a heavy argument for bulls who are counting on an upward correction from the pair. The next target will be the 1.3746 high - I recommend taking profit there. If the pressure on the pound continues during the European session, and the bulls show nothing in the support area at 1.3619, the optimal scenario will be buying from the fresh low of 1.3592, but only after a false breakout has been formed. It is possible to buy GBP/USD immediately on a rebound in the area of 1.3562, or even lower - from the level of 1.3530, counting on an upward correction of 15-20 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 1.3653, above which the moving averages pass, indicating the formation of a new downward trend. The optimal scenario for opening short positions will be a false breakout at this level, which will weaken the pound's position even more. In this case, the target will be support at 1.3619 - this is another passing low, so it is unlikely that an active struggle will be waged for it. A breakthrough and a test of this area from the bottom up will create another entry point into short positions and will push GBP/USD even lower - to 1.3592, and there it is close to the 1.3562 low, where I recommend taking profits. If the bears are not active around 1.3653, I advise you to postpone selling until the next major resistance at 1.3691, where the upper border of the new descending channel is already passing. I also recommend opening short positions from there only if a false breakout is formed. Selling GBP/USD immediately on a rebound is possible from the local high in the 1.3746 region, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) reports for August 10 showed that short positions have been reduced, while long ones sharply rose. All this is explained by the results of the Bank of England meeting, where representatives once again mentioned that in the near future the attitude to monetary policy will change towards tightening. Also, additional pressure on the pound was exerted by the US inflation report, which disappointed investors and coincided with the forecasts of economists. This suggests that the Federal Reserve will clearly not rush to make changes in its monetary policy, especially against the backdrop of the emergence of another problem - supply chain disruptions in the South Asian region. All this can seriously affect pricing, as well as the economic recovery of a number of countries, including the UK. However, as before, I advise you to stick to the strategy of buying the pound with every significant decline, as the big players do. The COT report indicated that long non-commercial positions rose from 43,119 to 44,750, while short non-commercial positions fell from 43,205 to 37,680, indicating continued buying from major players. As a result, the non-commercial net position returned to the positive side and reached 7070, against -86 a week earlier. Last week's closing price dropped from 1.3891 to 1.3846.
Trading is carried out below 30 and 50 moving averages, which indicates a bearish nature 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.
If the pair grows, the average border of the indicator in the area of 1.3653 will act as a resistance.
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) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial 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 short and long positions of non-commercial traders.