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05.08.2021 12:46 PM
GBP/USD: plan for the US session on August 5 (analysis of morning deals). The pound is reaching for yesterday's highs before the Bank of England's monetary policy decision

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

In my morning forecast, I paid attention to the resistance of 1.3902 and recommended that you make decisions on entering the market from it. Let's look at the 5-minute chart and figure out what happened. The sharp growth of the pair in the first half of the day above the level of 1.3902 then resulted in a downward correction of GBP/USD to this range. However, before the reverse test of 1.3902 from top to bottom, a couple of points were missing. Thus, there was no signal to open long positions. It is not quite right to make any decisions before publishing the Bank of England meeting results since the market reaction will be contrary to all logic as usual. If the regulator announces plans to make changes to monetary policy, we will observe the pound's growth in the second half of the day. Therefore, buyers' focus is now shifted to the resistance of 1.3951, which was formed on July 30 of this year. Only a breakthrough and a test of this level from top to bottom will lead to the formation of a signal to open long positions in the continuation of the growth of GBP/USD. In the growth above 1.3951, the nearest target of the bulls will be the resistance of 1.3995. A similar breakout of this level with a top-down test forms another entry point into long positions with the expectation of reaching the maximum of 1.4059, where I recommend fixing the profits. With the option of a decline in GBP/USD in the second half of the day due to the wait-and-see position of the Bank of England and against the background of strong data on the US labor market, buyers will have to think carefully about protecting the support of 1.3874. It has already proved its existence today in the lower border of the side weekly channel. Only the formation of a false breakdown will lead to a signal to open long positions in the hope of restoring the pair and continuing the upward trend. In the absence of active actions on the part of the bulls in the area of 1.3874, it is best to postpone long positions until the low of 1.3846 is updated, or even lower – to the level of 1.3807, where you can buy the pound 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:

As we can see, the big seller has not gone anywhere yet, and every time the pair approaches the range of 1.3925-1.3930, active actions occur that limit the upward potential of the pair. But no one is in a hurry to break below the weekly lows in the area of 1.3874 either. If the Bank of England declares that they will adhere to an ultra-soft exchange rate for a longer period, the British pound will collapse. However, the primary task of the bears is to protect the resistance of 1.3951, where the pound can "shoot" after the publication of the summary on monetary policy. The formation of a false breakdown forms a signal to open short positions to reduce the pair to the lower border of the weekly side channel 13874, on which the further direction of the bear market depends. A breakdown of this level and a test from the bottom up will hit the bulls' stop orders and push the pound to the next support of 1.3846, where it is worth thinking about profit-taking. The area of 1.3807 remains the longer-range target. In the absence of active actions of sellers in the area of 1.3951, I advise you to postpone sales until the next major resistance of 1.3995 or open short positions on GBP/USD immediately for a rebound from 1.4059, counting on a downward correction of 25-30 points within the day.

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The COT reports (Commitment of Traders) for July 27 recorded a reduction in long positions. However, sellers also did not insist and partially reduced their volume of positions. The growth of the pound throughout the week allowed the GBPUSD pair to return to monthly highs. However, it was not possible to gain a foothold higher. The panic after lifting all quarantine restrictions in the UK has receded, and now the main focus this week will be placed at the meeting of the Bank of England on monetary policy. The European Central Bank and the Federal Reserve System did not change anything. Most likely, the Bank of England will also do the same. Before abandoning the stimulus measures, the Bank of England committee members will surely wait for accurate data on how things are going on in the labor market. It is expected that a large-scale government program to support the labor market will be completed as early as September of this year. It may force the regulator to take a longer wait-and-see position since the central bank is not experiencing any special problems with inflationary pressure yet. If the Bank of England representatives start talking more about plans to reduce the bond purchase program, this will provide significant support to the pound. I advise you to stick to the strategy of buying the pair with each significant decrease in it, as the big players do. The COT report indicates that long non-commercial positions decreased from 44,223 to the level of 41,194.

In contrast, short non-commercial positions decreased from the level of 47,720 to the level of 46,878, indicating a cautious approach to sales at current highs. As a result, the non-commercial net position remained negative and amounted to -5,684 against -3,496 a week earlier. The closing price of last week jumped from the level of 1.3668 to 1.3826.

Moving averages

Trading is conducted around 30 and 50 daily averages, which indicates the sideways nature of the market before tomorrow's meeting.

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

Bollinger Bands

A break of the lower limit of the indicator in the area of 1.3874 will lead to a fall in the pound. A break of the upper limit of the indicator in the area of 1.3930 will lead to a new wave of growth of the pair.

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 specific 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.
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