Only a few market entry signals were formed yesterday. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 1.1706 level in my morning forecast and advised making decisions on entering the market from it. A breakthrough of 1.1706 and the reverse test from the top down created several good long entry points as the bull market continued to develop. In total, the pound managed to demonstrate growth by only 30 points, after which the pair collapsed due to rising inflation in the United States. I did not wait for the normal entry points in the afternoon.
When to go long on GBP/USD:
Obviously, the pound continues to experience weakness even despite the stable situation in the labor market, which only accelerates inflationary pressures. Yesterday's US inflation report led to the pound's collapse, which I warned about in my forecast. The apparent rise in the US consumer price index will force the Federal Reserve to continue to act aggressively by raising interest rates - September's increase of 0.75% at once is already a done deal. It is very important how the committee will show itself further and what plans will be outlined for the pace of raising interest rates in the US until the end of the year. An equally important inflation report in the UK is expected today, which could put even more pressure on the pound, as its growth will force the Bank of England to raise interest rates, pushing the economy even further into recession. For this reason, I advise bulls to focus on the immediate resistance at 1.1509, formed on yesterday's basis. I do not count on this level much, but in case GBP/USD falls in the morning, forming a false breakout at 1.1509 will provide a signal to buy the pound against the bearish market with the goal of recovering to 1.1561. A breakthrough and test from top to bottom of this range may pull stop orders of speculative bears, which creates a new buy signal with growth to a more distant level of 1.1604, where moving averages play on the bears' side. The farthest target will be the area of 1.1660, where I recommend taking profits.
In case the GBP/USD falls and there are no bulls at 1.1509, the pressure on the pair will return, which will open up the prospect of updating the September low. In this case, I advise you to postpone long positions until the next support at 1.1463. I recommend opening longs on GBP/USD immediately for a rebound from 1.1406, or even lower - around 1.1358, counting on correcting 30-35 points within the day.
When to go short on GBP/USD:
The bears have regained control of the market and now it is very important to cling to the nearest support at 1.1509, and also not to release the pair above 1.1561. The optimal scenario for opening short positions on GBP/USD would be forming a false breakout in the area of 1.1561, growth to which may occur after the release of a number of fundamental statistics on the UK. Only this will lead to a sell signal with the goal of returning to the area of 1.1509 - an intermediate support level formed yesterday. In order to keep the initiative, the bears need a breakdown and a reverse test of this range, which will provide a new entry point for shorts with a fall to the level of 1.1463. The farthest target will be the area of 1.1406, where I recommend taking profits.
In case GBP/USD grows and the bears are not active at 1.1561, the growth of the pound may intensify, which creates a chance for an upward correction. Only a false breakout near the next resistance at 1.1604 will provide an entry point to shorts with the goal of a slight downward movement of the pair. If there is no activity there, I advise you to sell GBP/USD immediately for a rebound from 1.1660, counting on the pair's rebound down by 30-35 points within the day.
An increase in short positions and a decrease in long ones were recorded in the Commitment of Traders (COT) report for September 6. This once again confirms the fact that the British pound is in a major downward peak, from which it is not as easy to get out as it might seem. Last week, Bank of England Governor Andrew Bailey made a speech, who did his best to inspire confidence that the central bank will continue to follow the path of defeating inflation and continue to aggressively raise interest rates. This suggests that at its next meeting the committee will probably raise rates by 0.75% at once, following the example of other central banks. However, the UK economy is getting worse and worse, and GDP is shrinking quite quickly, as evidenced by recent reports, which does not give confidence to investors. With high inflation and a looming cost-of-living crisis in the UK, it will be quite difficult for bulls to get room to take long positions as nothing good is in store for the stats ahead. The latest COT report indicated that long non-commercial positions decreased by 5,746 to 52,731, while short non-commercial positions rose by 15,516 to 103,163, which led to an increase in the negative value of the non-commercial net position to -50,423 versus -29 170. The weekly closing price collapsed from 1.1526 against 1.1661.
Trading is below the 30 and 50-day moving averages, indicating a resumption of the bear 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 the pair falls, the lower border of the indicator around 1.1410 will act as support. In case of growth, the upper border of the indicator around 1.1604 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 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.
Relevance up to 08:00 2022-09-15 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.