In the first half of the day, several interesting signals were formed to enter the market. Let's look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to 1.2037 and recommended making decisions from it. At the first test of this range, the bears achieved a false breakdown, which led to a signal to open short positions and, it seems, to resume the bear market. However, in total, the pair went down about 20 points, then returned to 1.2037. After the breakout of 1.2037 of the reverse test from top to bottom, I did not wait for this level, respectively, I was forced to skip the upward correction at 1.2094. At the time of writing, several false breakouts and sell signals from 1.2094 were formed, but they have not yet been implemented. Until the moment when trading is conducted below 1.2094, the chance of a fall in the pound and a resumption of the bearish trend will remain quite high. And what were the entry points for the euro this morning?
To open long positions on GBP/USD, you need:
There are several scenarios for the development of the situation for the pound, especially given today's fundamental background. Everything will depend on the decisions taken following the two-day meeting of the open market committee. If the policy of the Federal Reserve System remains within the framework of past forecasts, and the rate is raised by only 0.5%, the pound may continue to correct upwards – especially after going beyond the 21st figure. If Fed Chairman Jerome Powell announces more aggressive plans to raise rates in the future, demand for the US dollar will return and most likely we will see an update of annual lows. An important task for the bulls in the afternoon will be to control the new resistance of 1.2094, which has already been tested during the European session. There are still quite a few people willing to sell there. A breakout and a reverse test from top to bottom of 1.2094 will reduce the pressure on the pair and allow it to return to 1.2153, where I recommend fixing the profits. Most likely, it is in this range that large static sellers are located, counting on building the upper border of the side channel in the event of another correction of the pair. The more distant target will be the 1.2204 area. In the event of a decline in the pound after the US data, buyers will do everything possible to protect the support of 1.2037, which they missed in the first half of the day. Only in the formation of a false breakdown, there will be a signal to open new long positions in the continuation of the bullish correction. If there are no buyers at 1.2037, the pressure on the pair will seriously increase again. This will quickly open the road to 1.1989. For this reason, I advise you not to rush purchasing. It is best to enter the market after a false breakdown at this level. I do not advise buying GBP/USD immediately on a bounce, only a false breakdown in the area of 1.1938 will allow you to count on a rebound up by 30-35 points within a day.
To open short positions on GBP/USD, you need:
The bears received a serious rebuff and hurried to take profits after the recent large sell-off, which led to the loss of the pound by more than 600 points against the dollar. While trading is below 1.2094, we can count on a new downward movement of the pair. An additional false breakdown at this level after strong statistics on the US – especially on retail sales, all this will be a signal to open short positions further along with the trend before the Fed meeting. The target will be the nearest support of 1.2037. If the bears push through this level, the bulls' stop orders will come into play and the pair will instantly collapse to 1.1989, which is quite close to the annual minimum of 1.1938. The reverse test from the bottom up of 1.1989 will form an additional sell signal, allowing you to dump GBP/USD in the area of 1.1938, where I recommend fixing the profits. A more distant target will be the 1.1876 area, but this is the farthest scenario with a sharp increase in the Fed's rates by more than 0.5%. With the option of GBP/USD growth and lack of activity at 1.2094, an upward jerk may occur against the background of the demolition of bulls' stop orders. In this case, I advise you to postpone short positions to 1.2153. I advise you to sell the pound there only if there is a false breakdown. Short positions can be made immediately for a rebound from 1.2204, or even higher – from 1.2265, counting on the pair's rebound down by 30-35 points inside the day.
The COT report (Commitment of Traders) for June 7 recorded a large increase in long positions and only a small increase in short ones. However, as I think you understand, at the moment, the picture is completely different: the last three trading days have turned the market upside down. The further direction of the pair, which is in the area of annual lows, depends on the meeting of the Federal Reserve System and the decisions taken at it. A more aggressive policy will push GBP/USD further down, as the UK economy, as the latest data showed, is gradually reducing the growth rate, which does not give confidence to investors. The meetings of the Bank of England are unlikely to help the pound in any way since the regulator will not abandon the policy of raising rates. I very much doubt its further aggressive actions aimed at combating inflation by sacrificing the growth rate of the economy. Although the governor of the Bank of England, Andrew Bailey, continues to say that the regulator is not going to give up on raising interest rates yet, however, there are also no hints of a more aggressive approach to monetary policy. The COT report indicates that long non-commercial positions increased by 3,830 to the level of 34,618, while short non-commercial positions increased by 535 to the level of 105,428. This led to a decrease in the negative value of the non-commercial net position from the level of -74,105 to the level of -70,810. The weekly closing price rose from 1.2481 to 1.2511.
Signals of indicators:
Moving averages
Trading is conducted around 30 and 50 daily moving averages, which indicates some uncertainty before important statistics.
Note: The period and prices of 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
In the case of growth, the average border of the indicator in the area of 1.2094 will act as resistance.
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 9Bollinger Bands (Bollinger Bands). Period 20Non-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.