05.07.202113:20 Forex Analysis & Reviews: GBP/USD: plan for the US session on July 5 (analysis of morning deals).

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

Good data on activity in the UK services sector allowed the British pound to strengthen its position against the US dollar. However, the pair did not reach the levels I indicated in the morning. Because of this, no signals for entering the market have been formed yet. From a technical point of view, only the nearest support level changed slightly in the second half of the day, and the strategy remained the same.

Exchange Rates 05.07.2021 analysis

The ideal option for buyers is the formation of a false breakdown at the level of 1.3819, which has been converted from the support of 1.3811. This scenario forms a signal to open long positions in the expectation of further recovery of the pound to the resistance of 1.3870, which we have not yet reached. Moving averages pass below 1.3819, which supports the pair and leaves hope for a larger upward correction. A break of 1.3870 and a test of this area from top to bottom will form a new signal to buy GBP/USD and open a direct road to the maximum of 1.3922, where I recommend taking the profit. A more distant target will be a maximum of 1.3978. However, given that today is Independence Day in the United States, it is unlikely to happen. If the pressure on GBP/USD returns in the afternoon, and the bulls do not show activity in the area of 1.3819, it is best to postpone long positions until the support update of 1.3771, where I recommend buying the pair immediately for a rebound with the aim of an upward correction of 25-30 points within the day.

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

The initial task of the bears remains to protect the resistance of 1.3870, which the buyers have not yet reached in the first half of the day. The formation of a false breakdown will be a sell signal, which will push the pair to the support of 1.3819, for which an active struggle will unfold. Only a breakthrough of this range, together with the demolition of several buyers' stop orders and a reverse test of 1.3819 from the bottom up, will lead to the formation of an entry point into short positions in the continuation of the bear market to reduce to 1.3771, where I recommend fixing the profits. A more distant target will be this month's minimum of 1.3732. In the absence of active actions of sellers in the resistance area of 1.3870, I recommend postponing sales until the test of the maximum of 1.3922, where you can open short positions immediately for a rebound based on a downward correction of 25-30 points within the day.

Exchange Rates 05.07.2021 analysis

Let me remind you that the COT reports (Commitment of Traders) for June 22 recorded a sharp reduction in long positions and an increase in short ones. The report showed changes in the market after the US Federal Reserve's monetary policy meeting. A similar meeting of the Bank of England, which took place last week, only worsened the situation. Many traders were counting on a more active position of the regulator about interest rates and the bond purchase program. But as we already know, as long as there is no serious inflationary pressure in the UK, the Bank of England is unlikely to rush to make changes. The spread of the Indian strain of coronavirus in the UK creates additional difficulties with the full opening of the economy. Thus, traders also do not find reasons for the growth of the British pound. The economy may show more modest results in the 2nd quarter of 2021. Despite this, the optimal scenario remains the purchase of the pound with each good decline in pair with the US dollar. The COT report indicates that long non-commercial positions decreased from the level of 55,203 to the level of 51,445, but short non-commercial positions, on the contrary, increased sharply from the level of 23,033 to the level of 33,518. As a result, the non-commercial net position decreased from 32,170 to the level of 17,972. The closing price of last week changed significantly and amounted to 1.3924 against 1.4109.

Signals of indicators:

Moving averages

Trading is conducted above 30 and 50 daily averages, which indicates an attempt by the bulls to continue the upward correction.

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

Bollinger Bands

In case of a decline, the lower border of the indicator in the area of 1.3810 will act as support.

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-profit 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 the 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.

Miroslaw Bawulski,
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