Last Friday, several entry points were formed in the market. Let's take a look at the 5-minute chart to understand what happened. In my morning forecast, I highlighted the level of 1.3446 and planned to make entry decisions based on it. The rise and formation of a false breakout around 1.3446 created a point of entry for selling the pound; however, the pair did not drop as anticipated, resulting in a loss. In the second half of the day, bears showed strength around 1.3478, where a false breakout provided a point of entry for selling, yielding a downward movement of more than 140 pips.

For Opening Long Positions in GBP/USD:

The pound collapsed on news that the May U.S. labor market report exceeded all economists' forecasts, increasing the likelihood of rising inflation and, consequently, of the Federal Reserve raising interest rates in the second half of this year. Today, there are no reports from the UK, so there will be few reasons for the GBP/USD pair to recover. If the pair continues to decline, only the formation of a false breakout around the support level of 1.3317 will provide a point of entry for long positions, with a recovery to the level of 1.3346, formed by the end of today. A breakout and a retest of this range from top to bottom will increase the chances of GBP/USD strengthening, triggering stop-loss orders for sellers and creating a suitable entry point for long positions, with the possibility of reaching 1.3375, where I expect a more active appearance of bears. The furthest target will be at 1.3407, where I plan to take profits. If GBP/USD drops and there is no buying activity at 1.3317, which is more likely, pressure on the pound will increase again, leading to a move toward the next support level of 1.3290. Only the formation of a false breakout there will create suitable conditions for opening long positions. I intend to buy GBP/USD immediately on a bounce from the low of 1.3256, targeting a 30-35 pip intraday correction.

For Opening Short Positions in GBP/USD:

Pound sellers demonstrated their strength last Friday, regaining control of the market. The only challenge for them today could be positive news from the Middle East, which is unlikely to materialize. If the pair sees a correction, I expect the first appearance of bears in the area around 1.3346. Only a false breakout at this level will be grounds for opening new short positions, targeting a decline to the support level of 1.3317. A breakout and retest of this range from bottom to top will deliver a larger blow to buyer positions, triggering stop orders and opening the way to support at 1.3290. I expect a more active appearance of buyers there. The furthest target will be at 1.3256, where I will take profits. If GBP/USD moves higher and there is no activity at 1.3346, buyers will have a chance at a larger recovery at the start of the week, with substantial movement towards 1.3375, where the moving averages favor the bears. I plan to open short positions there only after a false breakout. I will sell GBP/USD immediately on a bounce from 1.3407, but only in anticipation of a 30-35 pip intraday correction.

Recommended for Review:

In the COT (Commitment of Traders) report for May 26, both long and short positions decreased. The fact that the Bank of England may soon be forced to raise interest rates to combat inflation is increasingly being discussed by representatives of the central bank, but this has not yet impacted buyer positions, as the situation in the Middle East is still unresolved, and it is quite difficult to predict what will happen next. The report indicates that long non-commercial positions decreased by 10,196 to 57,978, while short non-commercial positions fell by 13,006 to 119,376. As a result, the spread between long and short positions increased by 1,721.

Indicator Signals:

Moving Averages

Trading is taking place below the 30 and 50-day moving averages, indicating further decline for the pair.

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

Bollinger Bands

In the event of a decline, the indicator's lower boundary around 1.3270 will act as support.

Description of Indicators

• Moving average (indicates the current trend by smoothing volatility and noise). Period – 50. Marked in yellow on the chart;
• Moving average (indicates the current trend by smoothing volatility and noise). Period – 30. Marked in green on the chart;
• MACD indicator (Moving Average Convergence/Divergence – convergence/divergence of moving averages): fast EMA – period 12. Slow EMA – period 26. SMA – period 9;
• Bollinger Bands (Bollinger Bands). Period – 20;
• Non-commercial traders – speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting certain criteria;
• 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 total non-commercial net position is the difference between short and long positions of non-commercial traders.