Yesterday, several entry signals were made. Let's look at the 5-minute chart to get a picture of what happened. In my morning article, I turned your attention to 1.2464 and recommended making decisions with this level in focus. Decline and a false breakout after the weak UK labor market data produced a buy entry point, which resulted in a rise of more than 50 pips. In the second part of the day, the bulls' presence at the support level of 1.2504 also produced a buy signal, but after moving up by 30 points, the pair was under pressure again
Conditions for opening long positions on GBP/USD:
A cooling UK labor market and strong US retail sales data, which are forcing the Federal Reserve to keep raising interest rates - all this resulted in the pound falling yesterday with the intention to update weekly lows. Today there is nothing besides Bank of England Governor Andrew Bailey's speech, so bulls will have a chance for the upward correction, but only if they are able to protect the nearest support level of 1.2467, which was formed yesterday. A false breakout there, along with Bailey's hawkish statements about further interest rate hikes will produce a buy signal in the bearish market, with the prospect of pushing the pair to 1.2500. This area is in line with the bearish moving averages. Therefore, a breakout and a consolidation above this range will produce another buy signal, with a rally to 1.2533. The most distant target is seen in the area of 1.2567, where I will take profit.
If the price goes down to 1.2467 and there is no bullish activity there, the process of developing the bearish market will persist. I will open long positions at 1.2426 after a false breakout. I will also consider buying from a low of 1.2387, allowing a correction of 30-35 pips intraday.
Conditions for opening short positions on GBP/USD:
Bears have the opportunity to hit a new weekly low, but it would be better not to rush to open short positions today. Considering how bulls are taking every chance to be active, taking advantage of quite attractive prices, and how speculators behave in the absence of important data, I will hold short positions a false breakout through the next resistance of 1.2500. From there, the pair should trade lower. If there is no active sell-off, it is better to leave short positions. In this case, you can aim for the 1.2467 low, which is where the bulls were active yesterday, so I wouldn't count on protecting this area. A breakout and an upward retest of this level will provide a sell signal with a drop to 1.2426. The most distant target is still seen at a low of 1.2387, where I will take profit.
If GBP/USD goes up and there is no bearish activity at 1.2500, I will sell after a test of 1.2500 where the moving averages are passing. A false breakout there will create a sell entry point. If no drop follows, I will sell GBP/USD right on a bounce from a high of 1.2533, allowing a downward correction of 30-35 pips intraday.
COT report:
The COT report (Commitments of Traders) for May 9 showed an increase in both long and short positions. Even though the Bank of England's decision to raise interest rates is not yet reflected in this data, a surge in long positions indicates the presence of GBP buyers even at current levels. Taking into account a noticeable correction at the end of last week, demand for the trading instrument will likely get stronger. According to the latest COT report, short non-commercial positions rose by 12,900 to 71,561, and long non-commercial positions surged by 9,437 to 9,437. The non-commercial net position increased to 4,528 from 1,065 a week earlier. Growth resumed after a small decrease, which will likely positively affect the pound in the future. The weekly price rose and amounted to 1.2635 against 1.2481.
Signals of indicators:
Moving Averages
Trading is carried out below the 30 and 50 daily moving averages, which indicates a further decline.
Note: The author considers the period and prices of moving averages on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
If GBP/USD declines, the indicator's lower border at 1.2450 will stand as support.
Description of indicators
Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.Bollinger Bands. The period is 20.Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.Long non-commercial positions are the total number of long positions opened by non-commercial traders.Short non-commercial positions are the total number of short positions opened by non-commercial traders.The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.