In my morning article, I focused on the level of 1.2143 and recommended making decisions to enter the market, taking it into account. Let's look at the 5-minute chart and analyze it. The pound did not rise again. Moreover, after the failed attempt to hold the monthly highs and decline of GBP/USD, the bulls were not active around 1.2143. Therefore, traders didn't manage to enter long positions in the first half of the day. The technical indicators changed during the American session. Besides, they became favourable for the sellers.
To open long positions on GBP/USD, you need:
The US GDP report will become pivotal in the afternoon. Economists expect US gross domestic product to grow at an annualized 0.4% in Q2 2022. That is much better than the 1.6% drop in GDP in the first quarter. However, a breakdown of Q2 GDP may illustrate a more worrisome decline in consumer demand. This is the main driver of economic growth, which will only strengthen the demand for safe haven assets, including the US dollar. For this reason, I recommend being cautious about the pound's further purchases today. If the GBP/USD pair declines after the data, the best option to buy is a failed break around 1.2111 with moving averages favoring the buyers. In this case, the return to the intermediate resistance at 1.2154 is likely. If the pair breaks through this level, it will reach the high of 1.2188. A breakout of 1.2188 and a reversed top-down test will form a more powerful ascending impulse and give a buy signal with the jump target to 1.2224. A further target is 1.2267, where I recommend locking in profits. The GBP/USD pair's decline and absence of buyers at 1.2111 in the second half of the day will be the reason for increasing the pressure on the pound. In this case, it is better not to open long positions till 1.2071. It is advisable to buy there only on a failed break. I recommend opening long positions on GBP/USD immediately on a rebound from 1.2031, or even lower around 1.2001, with the target of 30-35 pips intraday correction.
To open short positions on GBP/USD, you need:
The sellers became active after the bulls made a failed attempt to continue rising above the monthly highs. This move affected stop orders as well, intensifying the pair's decline before the key US GDP report. The best scenario to open short positions to continue the bearish trend would be a failed break at 1.2154. Moreover, the pair may recover in case of positive US GDP report. However, I do not believe that a bull market is likely to develop today. A failed break will form a sell entry point. This move will regain the pressure on the pound and result in a decline at 1.2111, an intermediate support that was formed yesterday. A breakout and a reversed down-top at 1.2111 would form a sell entry point with a drop to 1.2071, where I recommend partly locking in profits. A further target will be the area of 1.2031. In case of GBP/USD growth and absence of bears at 1.2154 during the American session, buyers will regain control of the situation. Therefore, I advise traders not to sell immediately. Only a failed break near the highs at 1.2188 will provide an entry point to short positions, counting on the pair's downward rebound. If traders are not active there, the next upward surge is likely. In this case, I recommend not to open short positions till 1.2224, where it is possible to sell GBP/USD immediately on a rebound, counting on the pair's downward intraday rebound of 30-35 pips.
The COT report for July 19 recorded a reduction of both short and long positions. However, short positions were less, which led to a slight decrease in the negative delta. It is obvious that the bulls bought out the pound's annual lows. Currently, they are trying to show that the UK economy is almost robust and the Bank of England's steps to increase the interest rates are sensible. Further pound's growth will be affected by the Federal Reserve's decisions made in the middle of this week. The regulator will definitely raise interest rates by 0.75%. This move could lead to the dollar's strengthening if the central bank continues to pursue such an aggressive policy. Otherwise, the pound will have a better chance of further growth as the Bank of England holds a meeting in August with the possibility of raising interest rates. However, a bull market for the pound is unlikely to last long, taking into account the cost of living crisis in the UK and the economy slipping into recession. The COT report shows that long non-commercial positions fell by 1,907 to 31,943, while short non-commercial positions dropped by 3,746 to 89,193, lowering the negative non-commercial net position to -57,250 from -59,089. The weekly closing price rose to 1.2013 versus 1.1915.
Indicator Signals:
Moving averages
Trading is conducted above the 30 and 50-day moving averages, indicating a slight chance that the pair will continue rising in the second half of the day.
Note. The period and prices of moving averages are considered by the author on hourly chart H1 and differ from the common definition of classic daily moving averages on daily chart D1.
Bollinger Bands
In the case of decline, the low boundary of the indicator around 1.2031 will act as support.
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 (Moving Average Convergence/Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9Bollinger Bands (Bollinger Bands). Period 20Non-commercial traders are speculators, such as individual traders, hedge funds and large institutions, which 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.