In my morning forecast, I paid attention to the level of 1.2137 and recommended making decisions on entering the market. Let's look at the 5-minute chart and figure out what happened there. The pound slightly adjusted downwards at the beginning of European trading, but buyers did not allow it to break below 1.2137, which led to an excellent buy signal. As a result, the pair grew by more than 40 points on the first move. The second movement could capture about 50 points. In the afternoon, the technical picture has changed, as we have an important meeting of the Bank of England ahead of us.

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

Today is one of the most important days of this summer: the Bank of England is expected to decide on the most significant interest rate hike in the last 27 years, despite the growing risks of economic recession. It is predicted that the regulator will raise the rate immediately by 0.5%, which will be a clear response to the growing inflation in the UK, which is projected to be above 11.0% by the end of the year. If this happens, the pound will strengthen its position against the US dollar, but at the same time, you need to understand that such policy changes have already been taken into account in quotes, and it is unlikely that the growth will be prolonged. Rather, the bullish potential of the pair will depend on which path the Bank of England chooses next. If the aggressive policy persists, the bulls will continue to buy. In the event of a decline in the pound and a negative reaction to the meeting, the optimal scenario for buying will be a false breakdown in the nearest support area of 1.2149, formed by the results of the first half of the day. In this case, you can count on a new upward jerk of the pair to 1.2201 – the maximum of yesterday. A breakdown of this level will open the way to 1.2250. A more distant goal will be the maximum of this month 1.2291, where I recommend fixing the profits. If GBP/USD falls and there are no buyers at 1.2149, the pressure on the pound will seriously increase, forcing the bulls to take profits. If this happens, I recommend postponing long positions to 1.2100. I advise buying there only on a false breakdown since this level will be the last hope for maintaining the upward trend of July 14. It is possible to open long positions on GBP/USD immediately for a rebound from 1.2066 or even lower – around 1.2031 with the aim of correction of 30-35 points within a day.

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

Selling the pound is getting more complicated, so be careful and keep an eye on the level of 1.2201. While trading is below this range, I expect a decline in GBP/USD. As soon as we miss it, the bulls will take control of the market. The optimal scenario for opening short positions will be a false breakdown in the area of 1.2201 after the Bank of England's monetary policy decision, whatever it may be. It will return the pressure on the pound to reduce to the nearest support of 1.2149, just above which the moving averages are playing on the bulls' side. A breakout and a reverse test from the bottom up of this range will give an entry point to sell with a drop to 1.2100, and a more distant target will be the 1.2066 area, where I recommend fixing the profits. With the option of GBP/USD growth and the absence of bears at 1.2201 in the afternoon, the bulls will have a real chance to save the situation. However, I repeat: everything will depend on the statements of the Governor of the Bank of England, Andrew Bailey, and the further policy of the regulator. In this case, I advise you not to rush with sales. Only a false breakout in the 1.2250 area will give an entry point to short positions in the expectation of a rebound of the pair. In case of lack of activity, there may be a jump up to the monthly maximum. With this option, I advise you to postpone short positions to 1.2291, where you can sell GBP/USD immediately for a rebound, counting on the pair's rebound down by 30-35 points within a day.

The COT report (Commitment of Traders) for July 26 recorded a reduction in short positions and a sharp increase in long positions, which coincides with what we currently see in the market. The British pound is in active demand, and there is no doubt that the Bank of England will continue to raise interest rates this month. The aggressive policy of the regulator has a positive effect on the British pound, even though the economy is not in the best condition. The decision of the US Federal Reserve last week to raise interest rates in the fight against high inflation will affect the future decision of the Bank of England. However, it is worth saying that the demand for the pound is not as serious as it might seem. The upward movement of GBP/USD is taking place against a weakening dollar, as traders have received a clear signal that the US Central Bank may soften its interest rate hikes in the fall. But even against this background, it is not rational to wait for a further bull market for the pound, given the cost-of-living crisis in the UK and the economy gradually slipping into recession. The COT report indicates that long non-commercial positions increased by 2,663 to 34,606. In contrast, short non-commercial positions decreased by 597 to the level of 88,596, which led to a decrease in the negative value of the non-commercial net position to the level of 53,990 from the level of -57,250. The weekly closing price rose to 1.2043 against 1.2013.

Signals of indicators:

Moving Averages

Trading is conducted above the 30 and 50-day moving averages, indicating bulls' attempt to return to the market.

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

In case of a decline, the lower limit of the indicator in the area of 1.2115 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 use the futures market for speculative purposes and to 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.