Relevance up to 03:00 2022-06-11 UTC–4
Yesterday, several interesting signals were formed to enter the market. Let’s look at the 5-minute chart and figure out what happened. I paid attention to the 1.2520 level in my morning forecast and advised you to make decisions on entering the market from it. The lack of statistics and the breakthrough of 1.2520 allowed us to count on a sell signal to be created for the pound, which did not have to wait very long. The reverse bottom-up test of 1.2520 gave an excellent entry point into short positions, which caused the pair to fall by more than 40 points. However, bears failed to retain their advantage, as well as reach the nearest support of 1.2483 in the end. The bulls tried to defend 1.2520 in the afternoon, which led to a 40-point jump in the pound, but a false breakout at 1.2560 did not take place. For this reason, I was unable to sell the pound there. However, the signal for short positions turned out after the return and consolidation below the level of 1.2520. As a result, the downward movement was about 45 points.
When to go long on GBP/USD:
Today, the whole emphasis will be placed on US inflation, since there are no important fundamental statistics on the UK again. Most likely in the morning we will see the pound under pressure, so bulls will need to put in a lot of effort to protect the new support at 1.2480. Forming a false breakout at this level will lead to a signal to open new long positions in hopes of the resumption of the bullish trend. An equally important task is to return to the resistance of 1.2520, where the moving averages on the bears’ side pass. This can reduce the pressure and allow you to get to 1.2556. Testing 1.2556 from top to bottom will be a good signal for long positions based on the 1.2594 update, where I recommend taking profits. However, we can only reach this level if we hear of a real decrease in inflationary pressure in the United States in May, which we will learn about in the afternoon.
In case the pound falls and bulls are not active at 1.2480, the pressure will only increase. This will make it possible for you to return to 1.2457, from where it is best to enter the market after a false breakout. You can buy GBP/USD immediately for a rebound from 1.2432 – a monthly low, or even lower – around 1.2398, counting on correcting 30-35 points within the day.
When to go short on GBP/USD:
Bears are still pushing the market, but it is not yet possible to say that they have a strong advantage. In reality, everything will depend on the indicators of inflation in the United States: in case of its growth, the demand for the dollar will increase, and the pound will fall to monthly lows. Therefore, the bears need to protect the nearest resistance of 1.2520. Forming a false breakout there will provide a signal to open short positions in hopes of building a new downward trend, which will happen after a breakthrough of 1.2480. Consolidating below this level and a reverse test from the bottom up of this range will create another sell signal, allowing you to dump GBP/USD in the area of 1.2457, from which there is a direct road to 1.2432, where I recommend taking profits. The long-range target will be a low of 1.2398, which will completely cancel out the bull market.
In case GBP/USD grows and traders are not active at 1.2520, an upward jerk may occur amid the removal of the bears’ stop orders. In this case, I advise you to postpone short positions until 1.2520. But even there, I advise you to sell the pound only if there is a false breakout. You can open short positions immediately for a rebound from 1.2556, or even higher – from 1.2594, counting on the pair’s rebound down by 30-35 points within the day.
The Commitment of Traders (COT) report for May 24 showed that long positions decreased while short positions increased. However, this did not significantly affect the balance of power. Despite the pound’s growth since the middle of this month, the market remains completely under the bears’ control.
Apparently, only the absence of fundamental statistics, to which the pair has been reacting rather negatively lately, and a slight profit-taking from annual lows have enabled the GBP/USD to recover slightly. There are no other objective reasons for growth. The economy continues to slide into recession, inflation hits new records, and the cost of living in the UK is steadily rising. The Bank of England continues to rush between two fires, but despite all this, BoE Governor Andrew Bailey continues to say that the central bank is not going to refuse to raise interest rates yet. The widespread rumors that the US central bank plans to “pause” the cycle of raising interest rates in September this year continue to gain momentum, which puts some pressure on the US dollar and leads to the strengthening of the pound.
The COT report indicated that long non-commercial positions decreased by -667 to 25,936, while short non-commercial positions rose by 454 to 106,308. This led to an increase in the negative value of the non-commercial net position from -79,241 to -80,372. The weekly close rose from 1.2481 to 1.2511.
Trading is conducted below the 30 and 50-day moving averages, which indicates the bears’ attempt to seize the initiative.
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 a decline, the lower limit of the indicator around 1.2460 will act as support. In case of growth, the 1.2550 area will act as resistance.
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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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