In my morning forecast, I highlighted the level of 1.2664 and recommended making entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout around 1.2664 led to a buying signal for the pound. However, as you can see on the chart, there was no significant upward movement in the pair, and the pound continued to decline, forcing traders to cut losses. The technical picture was revised for the second half of the day.
To open long positions on GBP/USD, the following is required:
Considering that inflation in the United States and the Eurozone continues to decrease rapidly, it is not excluded that the UK's performance in this indicator will also be fine. The market is currently playing on these expectations. It was challenging to imagine that bulls would actively build up long positions on the pound at the end of the month after such a bullish rally. Ahead of us are important data on the number of initial claims for unemployment benefits in the United States. However, all attention will be focused on the main personal consumption expenditure index. This indicator could revive demand for the pound, halt the bearish market, and provide an opportunity for an upward correction. However, for this to happen, inflation in the United States must decrease more than economists expect. In the case of further decline in the pair, which is more likely, only the formation of a false breakout around the nearest support at 1.2609 will provide an entry point for long positions against the bearish market to develop a small upward correction by the end of the day. The target will be the new resistance at 1.2664, just above which the moving averages, playing on the sellers' side, are located. A breakout and consolidation above this range will lead to a new signal to open long positions with the target at 1.2722. The ultimate target will be the area of 1.2761, where I will take profits. In the scenario of further pair decline and the absence of buyer activity at 1.2609 in the second half of the day, the pressure on the pair will persist, leading to a more significant downward correction. In this case, only a false breakout around the support at 1.2563 will signal the opening of long positions. I plan to buy GBP/USD only on a rebound from 1.2526 to correct downward by 30-35 points within the day.
To open short positions on GBP/USD, the following is required:
Bears pushed the pound lower, but whether they have the strength to keep trading below 1.2664 is a rather debatable question. Acting on the rise from there will only be possible after forming a false breakout, which will be a suitable signal for further increasing short positions to return the pair to 1.2609. Only a breakout and a reverse test from bottom to top of this range against the backdrop of data on rising inflation in the United States will deal a more serious blow to buyer positions, leading to the removal of stop orders and opening the way to 1.2563. The more distant target will be the area of 1.2526, where I will take profits. In the scenario of GBP/USD growth and the absence of activity around 1.2664 in the second half of the day, bears will again lose control over the market, continuing the upward trend. In this case, I will postpone sales until a false breakout at 1.2722. If there is no downward movement, I will sell GBP/USD immediately on a rebound from 1.2761, but only counting on a pair correction down by 30-35 points within the day.
Indicator signals:
Moving averages
Trading is carried out below the 30 and 50-day moving averages, indicating the advantage of sellers.
Note: The author determines the period and prices of moving averages on the hourly chart H1 and differs from the general definition of classic daily moving averages on the daily chart D1.
Bollinger Bands
In case of a decline, the lower boundary of the indicator at 1.2643 will act as support.
Description of indicators:
• Moving average (MA, determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.
• Moving average (MA, determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions, 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.
• The total non-commercial net position is the difference between short and long positions of non-commercial traders.