Yesterday, there were several entry points. Now let's look at the 5-minute chart and try to figure out what actually happened. Previously, I considered entering the market from the level of 1.2662. A decline and false breakout on this mark produced a buy signal, and the pair grew by more than 50 pips. In the second half of the day, the bears safeguarding the resistance level at 1.2705 produced a sell signal. As a result, the pair dipped by 30 pips.
COT report:
Before going into the technical picture of the pound, let's look at what happened in the futures market. The Commitment of Traders (COT) report for June 27 showed that the volume of short positions has slightly dropped, while long ones increased. Pound buyers definitely have the chance to become more aggressive as the Bank of England, despite all the pressure and problems in the economy, will continue to pursue a policy of high interest rates due to serious problems with inflation affecting the living standards of households. The fact that the Federal Reserve has paused its tightening cycle while the Bank of England has no plans to do so makes GBP quite attractive. The best strategy is to buy the pair on the decline. The latest COT report states that short non-commercial positions increased by 2,815 to 104,382, while long non-commercial positions fell by 2,571 to 52,388. The non-commercial net position increased to 51,994 from 46,608 in the previous week. The weekly price was down to 1.2735 versus 1.2798.
For long positions on GBP/USD:
The Independence Day holiday in the US means that there is no important fundamental data both in the morning and in the afternoon. I expect low volatility and volume, so trading will be mainly in the sideways channel. I would prefer to buy using the decline and false breakout near the nearest support level at 1.2680. This will serve as a buy signal for GBP/USD, and the nearest resistance level at 1.2720 becomes the target for recovery, beyond which it has not been possible to break out lately. A breakout and a downward test of this mark will form another buy signal, which can boost the pound so it can reach 1.2755. It will be difficult for the bulls to expect further growth without this level. If the pair manages to climb above this range, the pound may reach 1.2796, where I will lock in profits.
If the pair declines to 1.2680 and bulls fail to protect this level, which is in line with the moving averages, downward pressure on the pound will remain strong. In that case, I will put off long positions until 1.2639. A false breakout there would provide an entry point for short positions. I plan to buy GBP/USD immediately if it rebounds from 1.2592, targeting an intraday correction of 30-35 pips.
For short positions on GBP/USD:
The bears tried their best, but because of the weak U.S. economic data, they failed to build a normal downward movement. Now they should prevent the pair from going beyond the upper band of the sideways channel and the nearest resistance level at 1.2720. Only a false breakout on this mark will form a sell signal, potentially pushing GBP/USD towards the support level at 1.2680, where I expect at least some buyers. A breakout and subsequent upward retest will produce a sell signal, potentially pushing the pair to 1.2639. The most distant target remains at 1.2592, where I will take profit.
If GBP/USD rises and bears fail to defend 1.2720, the bulls may have the upper hand, but we can't guarantee this due to the US Independence Day holiday. In such a case, I would postpone opening short positions until the pair tests the resistance at 1.2755. A false breakout there would provide an entry point for short positions. If downward movement fails to materialize I would consider opening short positions on GBP/USD if it rebounds from 1.2796, expecting an intraday correction of 30-35 pips.
Indicator signals:
Moving Averages
Trading is carried out around the 30- and 50-day moving averages, which indicates a sideways market.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If the pair grows, the upper band of the indicator at 1.2705 will act as resistance. If the pair falls, the lower band of the indicator at 1.2680 will act as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.