GBP/USD: plan for the US session on June 1 (analysis of morning trades)

To open long positions on GBP/USD, you need to:

In the first half of the day, several signals were formed to enter the market. Let's look at the 5-minute chart and analyze all the entry points. Weak data on the decline in activity growth in the UK manufacturing sector negatively affected the position of the British pound. In the morning, I recommended paying attention to the support of 1.4216 and advised to open long positions from this level. As a result of a false breakdown, a buy signal was formed. However, a strong upward movement in the continuation of the trend did not work, and after a jump of 20 points, the bull market ended.

After the repeated test of the level of 1.4216, there was a breakdown. However, I did not see a reverse correction, so there was no sell signal from 1.4216. I had to wait for the support update to 1.4169, where I advised buying immediately for a rebound, which happened. The movement from this level up was about 20 points.

In the second half of the day, much will depend on the US data and the behavior of the bulls in the event of a repeated decline of the pair to the support area of 1.4169. The primary task of GBP/USD buyers will be to maintain control over this level. Moreover, the formation of a false breakdown, together with weak data on the US manufacturing sector, may lead to the formation of a new signal to open long positions, already to recover to the resistance area of 1.4126. Its breakout and a top-down test on the volume will open a direct road for GBP/USD to the area of the maximum of 1.4264, where I recommend taking the profits. If the pressure on the pound continues in the second half of the day, and if the bulls do not show any activity in the support area of 1.4169, I recommend not to rush to buy. The optimal scenario is long positions immediately on the rebound from the low of 1.4137, or even lower - from the level of 1.4102 in the expectation of an upward correction of 25-30 points within the day.

To open short positions on GBP/USD, you need to:

In the first half of the day, we did not see the pound's growth, and the bears quickly regained control over the level of 1.4216 and even reached the test of the further support of 1.4169, which they will focus on in the second half of the day. A breakout and a test of this area from the bottom up, together with good fundamental indicators for the US economy, will form an additional entry point into short positions, which will collapse GBP/USD to the minimum of 1.4137, where I recommend taking the profits. A more distant target will be the area of 1.4102. In the scenario of the pound's growth in the second half of the day, the bears' task will be to protect the resistance of 1.4216. The formation of a false breakout forms a signal to open short positions. Suppose there is no activity on the part of sellers. In that case, it is best to take your time: I advise you to postpone short positions until the update of the maximum of 1.4264, from which you can sell GBP/USD immediately on the rebound in the expectation of a downward correction of 20-25 points within the day.

Let me remind you that the COT reports (Commitment of Traders) for May 25 recorded a reduction in short positions and a sharp increase in long ones. Recent statements by the Bank of England representatives that now is the time to think about curtailing support measures and raising interest rates surprised many traders. However, this returned the demand for the British pound, which managed to pull up to annual highs. The pound was also supported by the news that from June 21 this year, the UK economy will be fully open, and all restrictive measures due to COVID will be canceled. It will be an excellent bullish boost for retail sales and inflation. Against this background, the upward potential of the pound will remain relatively high. It would be best if you waited for a little. The COT report indicates that long non-profit positions increased from 63,027 to the level of 64,193. However, short non-profit positions sharply decreased from the level of 38,127 to the level of 33,534, which indicates profit-taking and the departure of sellers from the market after unsuccessful attempts to turn the market to their side. It is another plus in the piggy bank of buyers of the pound and those who believe in continuing the medium-term upward trend. As a result, the non-profit net position increased from 24,900 to 30,659. The closing price of last week did not change significantly and amounted to 1.41553 against 1.41479.

Signals of indicators:

Moving averages

Trading is conducted below 30 and 50 daily averages, which indicates a clear predominance of sales of the pound in the first half of the day.

Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger Bands

A break of the lower limit in the area of 1.4170 will increase the pressure on the pound. The growth will be limited by the upper level of the indicator in the area of 1.4255.

Description of indicators