FX.co ★ GBP/USD: plan for the European session on June 15. COT reports. Pound may be in serious trouble. Bulls need to regain control of resistance at 1.4128

To open long positions on GBP/USD, you need:

Yesterday several signals were formed to enter the market in short and long positions. Let's take a look at the 5 minute chart and break down the trades.

In the first half of the day, I recommended paying attention to the 1.4086 level and advised you to make a decision on entering the market. One could clearly see that the bears managed to surpass the 1.4086 level from the first test, after which it is updated from the bottom up, which generates a signal to open short positions in continuation of the bear market. However, a downward movement does not work, after which the bulls regain control of this level and test it from top to bottom, creating a good entry point into long positions. After some time, the pound rose to the resistance area of 1.4125, before the test of which literally a few points were missing. The upward movement, after the formation of a buy signal, amounted to about 40 points.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The Commitment of Traders (COT) reports for June 8 showed that both long and short positions decreased, but this did not negatively affect the positive delta, but on the contrary, it even increased due to a larger reduction in sellers' positions. This indicates the presence of a fairly large interest of buyers with each decline in the pound. Similar statements from representatives of the Bank of England no longer work, and the market reacts rather weakly even to the speeches of Governor Andrew Bailey. Without real changes and adjustments to the bond buying program by the central bank, it will be quite difficult for the British pound to get out of the horizontal channel, in which it has been in for almost a month. An important moment will be the full opening of the UK economy, which is scheduled for the 20th of this month. The spread of the Indian strain of the coronavirus in the territory creates a number of obstacles to this, which affects the desire of investors to buy the British pound. The best scenario is to buy for every good decline in the British pound against the US dollar. The COT report indicated that long non-commercial positions fell from 64,204 to 59,238, while short non-commercial positions fell much more strongly from 40,079 to 31,524. As a result, the non-commercial net position rose from 24,125 to 27,714. Last week's closing price changed significantly and amounted to 1.41757 against 1.42270.

The bulls' main task for today is to keep support at 1.4097 under their control, which they managed to form yesterday afternoon amid low volatility of the pair. Good data on changes in the number of applications for unemployment benefits and the unemployment rate in the UK will provide help in this. If the reports turn out to be better than economists' forecasts, forming a false breakout at the 1.4097 level generates a signal to open long positions in the expectation of a new upward trend in the pound and a rebound from the dangerous lower border of the horizontal channel, in which GBP/USD has been located since the end of last month. In such a scenario, one can count on the resistance update at 1.4128. A breakthrough and test of this area from top to bottom will open a direct road to new highs in the 1.4156 and 1.4188 areas, where I recommend taking profits. The 1.4188 level is the upper border of the wide horizontal channel, so it will not be easy to deal with it. If the pressure on the pound returns, and the bulls are not active near the support of 1.4097, I recommend not to rush into buying: the optimal scenario would be long positions immediately to a rebound from support at 1.4070, or even lower - from the level of 1.4041, counting on an upward correction of 25-30 points within the day.

To open short positions on GBP/USD, you need:

The bears need to think of a way to regain control of support at 1.4097, which formed yesterday. However, before that, most likely, the bears will have to form a false breakout at the level of 1.4128, which will be formed only in case we receive a disappointing report on the recovery of the UK labor market after the coronavirus pandemic. Failure to rise above this range creates an excellent signal to open short positions that aims to pull down the pound to the area of a low like 1.4097. A breakthrough and consolidation below this range with a reverse test of it from the bottom up will result in creating another entry point into short positions in hopes that GBP/USD returns to a low like 1.4070 and an exit to the area of 1.4041, where I recommend taking profits. If the bears are not active in the area of intermediate resistance at 1.4128, it is best to postpone selling until the resistance of 1.4256 is updated, where you can open short positions in the pound immediately on a rebound, counting on a downward correction of 20-25 points within the day. Larger resistance is seen in the area of 1.4188, a breakthrough of which will determine the pair's succeeding direction in the medium term.

Indicator signals:

Trading is carried out in the area of 30 and 50 moving averages, which indicates some uncertainty with the pair's succeeding direction.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

A breakthrough of the upper border of the indicator in the area of 1.4128 will lead to an increase in the pound. Surpassing the lower border in the area of 1.4097 will increase the pressure on the pair.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that 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.
• Total non-commercial net position is the difference between short and long positions of non-commercial traders.