To open long positions on GBP/USD, you need:
Several sell signals were formed for the pound yesterday. Even in my morning forecast, I drew attention to the level of 1.3737 and to the divergence that loomed on the MACD indicator. Let's take a look at the 5 minute chart and see what happened. The stars converged - failure to settle above 1.3737 and the inability of the MACD indicator to renew yesterday's highs - all this resulted in forming a false breakout and an excellent entry point for short positions. As a result, the pair dropped to support 1.3691, which was literally 2-3 points short of the test. A similar story happened in the second half of the day, but with a new resistance level at 1.3743. Another unsuccessful attempt by the bulls to rise above the weekly highs resulted in creating a sell signal and the pound fell by 30 points.
Today we do not have important fundamental statistics for the UK, and also there are no speeches by representatives of the Bank of England. Therefore, we can assume that trading will mainly be carried out in the horizontal channel for the first half of the day, however, the bulls will not give up hope for a breakout and consolidation above resistance at 1.3728. Only a test of this level from top to bottom can create a good entry point into long positions with the aim of entering a new high of 1.3756, with the prospect of updating 1.3782, where I recommend taking profits. The next target will be the 1.3810 level, but it is still too early to talk about it. Considering the fact that trading is carried out in the area of moving averages, we can talk about a pause in the upward trend. Therefore, in case GBP/USD falls in the first half of the day, the optimal scenario will be long positions from the level of 1.3696, but only if a false breakout is formed there. This is the only scenario that generates a signal to buy GBP/USD in order to continue the upward correction. If the pressure on the pound persists, and the bulls are not active in the support area of 1.3696, the optimal scenario will be long positions from a new low like 1.3662, but only after forming a false breakout. It is possible to buy GBP/USD immediately on a rebound in the area of 1.3634, or even lower - from the level of 1.3603, counting on an upward correction of 15-20 points within the day.
To open short positions on GBP/USD, you need:
The bears' initial task is to protect the resistance at 1.3728, which was formed on the basis of yesterday's results. The optimal scenario for opening short positions will be the formation of a false breakout at this level, which will weaken the pound's position even more. In this case, the target will be support at 1.3696 - this is yesterday's low, so its breakdown can result in removing a number of the bulls' stop orders and return the pressure on the pair. A breakout and test of this area from the bottom up will form another entry point into short positions and will push GBP/USD even lower - to 1.3662, and there it is close to the low - 1.3634, where I recommend taking profits. If the bears are not active around 1.3728, I advise you to postpone selling until the next major resistance at 1.3756, which may become a new weekly high. 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 1.3782 area, counting on a downward correction of 25-30 points within the day.
I recommend that you familiarize yourself with:
The Commitment of Traders (COT) reports for August 17 showed that both short and long positions have been reduced. The fact that representatives of the Bank of England (BoE) are in no hurry to talk about changes in monetary policy affects the activity of traders. Last week's data on retail sales and inflation in the UK once again proved that no one will rush to raise interest rates until the end of 2022 - and this is a fairly long time horizon. This put pressure on the pound. But I have repeatedly noted that the lower the pound falls, the more active buyers of risky assets will begin to show themselves, betting on real changes in the BoE's monetary policy in the future. The COT report showed that long non-commercial positions declined from 44,750 to 41,898, while short non-commercials declined from 37,680 to 37,274, indicating a near equilibrium in the balance of power. As a result, the non-commercial net position slightly decreased and reached 4,651, against 7,070 a week earlier. Last week's closing price remained practically unchanged at 1.3840 against 1.3846.
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways 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.
A breakthrough of the lower border of the indicator in the area of 1.3705 will lead to a new wave of decline in the pound. Surpassing the upper border in the area of 1.3730 can push the pair to rise.
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.