In my morning forecast, I highlighted the level of 1.2441 and recommended making entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The drop and the formation of a false breakout at this level gave an excellent buying signal, increasing by more than 30 points. Active defense from sellers at the resistance of 1.2471 allowed entering short positions, which led to a decrease in GBP/USD by more than 15 points at the time of writing this article. Considering the intraday volatility of only 40 points, this is quite good.
To open long positions on GBP/USD:
In the second half of the day, I will wait for the data on the number of initial claims for unemployment benefits. Considering that bulls are having difficulties with further pair growth, a decrease in claims could lead to a larger decline in GBP/USD with a return to 1.2444, new support formed during the first half of the day. For this reason, I will act after the level of 1.2444 is retested, below which the moving averages supporting the buyers are located. A false breakout formation there will provide a buying signal with the prospect of a new upward movement towards the resistance of 1.2478, also formed during the European session. A breakthrough and a reverse test of this range from top to bottom will give an additional signal to open long positions, strengthening the presence of bulls in the market and targeting a move towards 1.2509, allowing the return of the upward trend. The ultimate target will be the area of 1.2538, where I will take profits.
In the scenario of a pound decline towards 1.2444 and a lack of activity from buyers, pressure on the pair will return. In such a case, I will postpone market entry until the intermediate support of 1.2419. I will open long positions there based on a false breakout, similar to what I described earlier. I plan to buy GBP/USD on a rebound from 1.2395, aiming for a 30-35 points correction within the day.
To open short positions on GBP/USD:
Sellers attempted to reenter the market but failed to break below the daily lows. Considering the absence of statistics and the aggressive response around 1.2478, as long as trading remains below this level, we can expect a further decline in the pair. I prefer to open new short positions only around the resistance of 1.2478 formed during the first half of the day. A false breakout formation will be a selling signal, providing an opportunity for a downward move toward the new support at 1.2444. A breakthrough and a reverse test from the bottom to the top of this range will bring a bearish sentiment back to the market, nullifying the entire rise and providing a signal to open short positions with a decline towards 1.2419. The ultimate target remains the minimum at 1.2395, where I will take profits.
In the event of another rise in GBP/USD and a lack of activity at 1.2478 after weak labor market statistics in the second half of the day, buyers will attempt to push the pair higher in anticipation of a new bullish trend. In such a case, I will postpone selling until the resistance of 1.2509 is tested. A false breakout there will be the entry point for short positions. I plan to sell GBP/USD on a rebound from 1.2538, but only with the expectation of a downward correction of 30-35 points within the day.
The COT (Commitment of Traders) report for May 30 showed a reduction in short positions and an increase in long positions. The pound experienced a significant decline, but good statistics released last week helped stop the decline and partially offset the losses in May. However, the expectation that the Federal Reserve will continue to raise interest rates limits the upward potential of the pair. Despite the Bank of England's pause in June regarding monetary policy, an overheated labor market will only allow the committee to halt the cycle of monetary tightening for a short time. According to the latest COT report, short non-commercial positions decreased by 529 to 57,085, while long non-commercial positions increased by 1,117 to 70,320. This led to an increase in the non-commercial net position to 13,235 compared to 11,059 the previous week. The weekly price decreased to 1.2398 from 1.2425.
Indicator signals:
Moving Averages
Trading is conducted above the 30-day and 50-day moving averages, indicating further pair growth.
Note: The author considers the period and prices of the moving averages on the H1 hourly chart, which differs from the general definition of classical daily moving averages on the D1 daily chart.
Bollinger Bands
In case of a decline, the lower boundary of the indicator, around 1.2419, will act as support.
Description of Indicators
• Moving average (determines the current trend by smoothing out volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing out volatility and noise). Period 30. Marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands. Period 20.
• Non-commercial traders - speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting 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.
• The net non-commercial position is the difference between non-commercial traders' short and long positions.