Relevance up to 02:00 2022-07-23 UTC–4
Several fairly profitable market entry signals were formed yesterday. Let’s take a look at the 5-minute chart and see what happened. I paid attention to several levels in my morning forecast and advised making decisions on entering the market from it. A breakthrough and reverse support test at 1.1965 resulted in a great sell signal for the pound, resulting in a massive selloff to the 1.1925 area, taking about 40 points of profit from the market. Traders then defended 1.1925 and several false breaks resulted in an entry point for a long position. As a result, the pair rose by 45 points. In the afternoon, even before the European Central Bank’s decision was announced, a false breakout was formed and a signal to buy the pound in the area of 1.1925. This made it possible to take more than 60 points of profit from the market after the pair’s sharp upswing to 1.1988. Failure to consolidate at this level and a signal to sell – all this caused the pair to fall by another 100 points.
When to go long on GBP/USD:
The pound continues to be sold every time it tries to rise to the 1.2000 area, which indicates the presence of a static major player. A number of important reports are expected today, which may increase the pressure on the pair. I advise you to take a closer look at indicators on the index of business activity in the manufacturing sector, the index of business activity in the services sector and the composite index of business activity in the UK. The volume of retail sales in the UK will be important, a decline of which will positively affect inflation rates, but negatively on the rapidly weakening economy. In case the pair goes down after the data, the best scenario for buying will be a false breakout in the area of the nearest support at 1.1933, formed on the basis of yesterday. In this case, you can count on a return to the rather important resistance of 1.1994, which has already withstood blows from bulls twice. A breakthrough of this level opens the way to a weekly high of 1.2040. A breakthrough of 1.2040 and a reverse downward test will create a more powerful upward momentum, which will provide a buy signal with a target at 1.2081. A similar breakthrough of this level will open the prospect of reaching 1.2119, where I recommend taking profits.
If the GBP/USD falls and there are no bulls at 1.19633, the pressure on the pound will seriously increase. With this option, I recommend postponing long positions until 1.1881. I advise you to buy there only on a false breakout. You can open long positions on GBP/USD immediately for a rebound from 1.1818, or even lower – in the area of 1.1762, counting on correcting 30-35 points within the day.
When to go short on GBP/USD:
Bears coped with their task yesterday and defended a very important level of 1.2000, preventing the bulls from continuing the pair’s upward correction. Today they will have to make every effort again not to release the GBP/USD above this range. The optimal scenario for opening short positions would be a false breakout around 1.1994 after weak statistics on activity in the UK, which will most likely turn out to be so. This will bring back pressure on the pound to move down to important support at 1.1933. Quite a lot will depend on this level, so I expect a fairly active fight there. A breakthrough and reverse test from below 1.1933 will provide an entry point for selling with a fall to 1.1881, where I recommend partially taking profits. A more distant target will be the area of 1.1818, but this is already in the worst case scenario.
In case GBP/USD grows and the absence of bears at 1.1994 in the first half of the day, the bulls will regain control of the situation. In this case, I advise you not to rush into short positions. Only a false breakout around the weekly high of 1.2040 will provide an entry point into shorts, counting on the pair’s rebound downward. If traders are not active there, another upsurge may occur. With this option, I advise you to postpone short positions to 1.2081 and 1.2119, where you can sell GBP/USD immediately for a rebound, based on a rebound of the pair down by 30-35 points within the day.
The Commitment of Traders (COT) report for July 12 logged a decrease in both short and long positions, but the former turned out to be much more, which led to an increase in the negative delta. Another attempt to buy back the annual low again failed, although by the end of the week, traders began to take profits, taking advantage of strong US statistics, which led to a slight correction in the pound, which has been implied for quite some time. The crisis in the cost of living in the UK continues to flare up, and so far the government can do nothing about it. At the same time, the Federal Reserve’s policy and its pace of raising interest rates in the US, and the next increase is expected at once by almost 1.0%, provides the dollar with much more support, pushing the pound lower and lower. The COT report indicated that long non-commercial positions decreased by 5,768 to 33,850, while short non-commercial positions decreased by 2,887 to 92,939, which led to an increase in the negative value of the non-commercial net position to -59,089 from level -56 208. The weekly closing price decreased and amounted to 1.1915 against 1.1965.
Trading is carried out in the area of 30 and 50-day moving averages, which indicates the sideways nature of the market.
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.
In case of growth, the area of 1.2010 will act as resistance. In case the pair goes down, the lower border of the indicator around 1.1930 will act as support.
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 9Bollinger 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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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