In my morning forecast, I focused on the level of 1.2758 and planned to make trading decisions from that point. We should examine the 5-minute chart and analyze what happened. The breakout and subsequent retest of 1.2758 led to a buying entry point. However, after moving up by 12 points, the momentum weakened, resulting in a return to around 1.2758 and then a drop in the pound below this level. In light of this, the technical picture for the second half of the day has been completely revised.
To Open Long Positions on GBP/USD:
Given the absence of significant U.K. statistics, the active moves by bulls around 1.2758 were not surprising, but support from major players was not evident. It's likely that the pair will trade within a sideways channel during the second half of the day, as there are no significant U.S. data releases or Federal Reserve speakers scheduled. Considering that we've already seen attempts from buyers, it's unlikely that anyone will try to break above the daily high again. Therefore, I prefer to act on a decline around the nearest support at 1.2735, formed based on yesterday's results. Only the formation of a false breakout would be a suitable condition for opening long positions, targeting a rise towards the resistance at 1.2775, which we couldn't reach earlier. A breakout and retest of this range from top to bottom would increase the chances of the pound rising, leading to a long entry point with a potential exit at 1.2807. The farthest target would be the 1.2836 area, where I plan to take profits. If GBP/USD declines and there is no bull activity around 1.2735 in the second half of the day, which I personally doubt, the pound could decline more significantly. This would lead to a drop and the renewal of support at 1.2700, increasing the chances of a larger fall. Therefore, only the formation of a false breakout around that level would be a suitable condition for opening long positions. I plan to buy GBP/USD immediately on a rebound from the 1.2667 low, targeting an intraday correction of 30-35 points.
To Open Short Positions on GBP/USD:
Sellers have proven that they are still present, and now I expect their first activity around the resistance at 1.2775. Only the formation of a false breakout would confirm the presence of large players in the market, betting on further pound declines, providing an opportunity to open new short positions targeting the support at 1.2735. A breakout and retest from below this range would undermine the buyers, leading to stop-loss triggers and opening the way to 1.2700. The farthest target would be the 1.2667 area, where I plan to take profits. Testing this level would reestablish the bearish trend. If GBP/USD rises and there is no bear activity at 1.2775 in the second half of the day, buyers will have a good chance to recover the pair towards the end of the week. In that case, I'll postpone selling until a false breakout at 1.2807. If there's no downward movement, I'll sell GBP/USD immediately on a rebound from 1.2836, but only targeting a downward correction of 30-35 points.
In the COT report (Commitment of Traders) for July 30, there was an increase in short positions and a decrease in long positions. This shift in the balance of power is not surprising, as the Bank of England clearly indicated during its meeting that it intends to continue lowering interest rates, since the economy now needs special support after addressing inflation. The Federal Reserve's decision to keep interest rates unchanged, in contrast to the Bank of England, resulted in the pound's decline, which is likely to continue in the near future. The latest COT report shows that long non-commercial positions decreased by 22,854 to 165,635, while short non-commercial positions increased by 7,858 to 54,164. As a result, the spread between long and short positions increased by 348.
Indicator Signals:
Moving Averages:
Trading is taking place above the 30 and 50-day moving averages, indicating further growth of the pair.
Note: The period and prices of the moving averages are considered by the author on the H1 hourly chart and differ from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands:
In the event of a decline, the lower boundary of the indicator around 1.2735 will act as support.
Indicator Descriptions:
Moving average (MA): Determines the current trend by smoothing volatility and noise. Period 50. Marked in yellow on the chart.Moving average (MA): Determines the current trend by smoothing volatility and noise. Period 30. Marked in green on the chart.MACD (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 that use the futures market for speculative purposes and meet specific requirements.Long non-commercial positions: The total long open position of non-commercial traders.Short non-commercial positions: The total short open position of non-commercial traders.Total non-commercial net position: The difference between short and long positions of non-commercial traders.