In my morning forecast, I focused on the 1.2858 level and planned to make market entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The breakout and subsequent retest of 1.2858 provided a buy signal for the pound, resulting in a rise of more than 20 points. The technical outlook for the second half of the day has been slightly revised.
To Open Long Positions in GBP/USD:
Given the positive GDP data from the UK, which indicated economic growth, the pound continued its upward movement even before the release of US inflation data. In the second half of the day, I will act as follows: if the Consumer Price Index rises, the pound will inevitably fall as everyone starts buying the dollar. If the data indicates a decline in US inflation, the pound will gain momentum to continue the bullish market. In the event of a decline, I prefer to act at the new support level of 1.2856, formed after the first half of the day. Forming a false breakout will provide a good entry point for long positions with the prospect of updating the 1.2890 high. A breakout and retest from above will strengthen the pound's upward potential, leading to a long entry with the possibility of testing 1.2923. The ultimate target will be the 1.2957 area, where I will take profit. If GBP/USD declines and there is no bullish activity at 1.2856 in the second half of the day, the pressure on the pair will increase. This will also lead to a decline and test of the next support at 1.2825, where the moving averages support the bulls. Even this will not significantly harm the bullish market. Forming a false breakout will provide a suitable condition for opening long positions. I plan to buy GBP/USD immediately on a rebound from the 1.2795 low, targeting an intraday correction of 30-35 points.
To Open Short Positions in GBP/USD:
Sellers have yet to be very active today. Now, the focus will be on US statistics, as only this can stop the bullish frenzy observed after yesterday's speech by a Bank of England representative. I prefer to act on the sell side only after a rise and false breakout around the new resistance at 1.2890, where the pair is currently heading. This will provide a suitable entry point for short positions aiming for a decline to the support at 1.2856, formed after the first half of the day. A breakout and retest from below will hit the buyers' positions, triggering stop orders and opening the path to 1.2825, where the moving averages are located. The ultimate target will be the 1.2795 area, where I will take profit. Testing this level will significantly harm the pound's upward potential. If GBP/USD rises and there is no bearish activity at 1.2890 in the second half of the day, buyers will have a chance to continue the growth. In this case, I will postpone sales until a false breakout at the 1.2923 level. If there is no downward movement, I will sell GBP/USD immediately on a rebound from 1.2957, targeting an intraday correction of 30-35 points.
In the COT report (Commitment of Traders) for July 2, long positions increased while short positions decreased. Despite comments from Bank of England representatives regarding future policies and the likely rate cut in August this year, the pound regained some strength. It recovered from a significant drop caused by the high probability of policy divergence between the Bank of England and the Federal Reserve System. Now traders are waiting for new guidance from the Fed, provided by Jerome Powell's speech in Congress and US inflation data, determining the direction for risk assets, including the British pound, for the coming weeks. The latest COT report shows that long non-commercial positions increased by 4,206 to 106,753, while short non-commercial positions fell by 13,787 to 44,712. As a result, the spread between long and short positions increased by 717.
Indicator Signals:
Moving Averages:
Trading is conducted above the 30 and 50-day moving averages, indicating further growth for the pound.
Note: The author considers the period and prices of the moving averages on the hourly H1 chart and differs from the general definition of classical daily moving averages on the daily D1 chart.
Bollinger Bands:
In case of a decline, the indicator's lower boundary, around 1.2825, will act as support.
Description of Indicators:
- Moving average (50-period): Defines the current trend by smoothing volatility and noise. Marked in yellow on the chart.
- Moving average (30-period): Defines the current trend by smoothing volatility and noise. 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 use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions: The total long open positions of non-commercial traders.
- Short non-commercial positions: The total short open positions of non-commercial traders.
- Total non-commercial net position: The difference between non-commercial traders' short and long positions.
