To open long positions on GBP/USD, you need:
In the first half of the day, I paid attention to the importance of protecting the support of 1.2965, on which the potential for further upward movement of the British pound depended. Given that even a false breakout was formed at this level, which I indicated on the 5-minute chart, it was possible to enter long positions. However, there was no good growth for the continued strengthening of the GBP/USD, even against the background of good data on activity in the UK construction sector. Only then, the pair's repeated return to this support led to its breakdown.
Now the situation for buyers of the pound has changed. They need to be selected above the resistance of 1.2675, which will be a signal to open long positions. Only a breakout and consolidation above this range will form a good entry point for long positions, which will strengthen the bullish short-term trend of the pair and lead to an update of the maximum of 1.3029. The longer-term target remains the area of 1.3089, where I recommend taking the profit. In the scenario of a further decline in the pair, the focus will again be placed on protecting the middle of the channel of 1.2897. But only the formation of a false breakout there will be a signal to open long positions. If there is no activity from the bulls at this level, I recommend that you do not rush to buy, but wait for the test of the lower border of 1.2819 and buy the pound there for a rebound in the expectation of a correction of 30-40 points within the day.
To open short positions on GBP/USD, you need:
Sellers now need to defend the resistance of 1.2965. Testing it from the reverse side on the volume will be a signal to open short positions in the expectation of resuming the bear market. An equally important task is to consolidate below the middle of the 1.2897 side channel. Only this option will lead to the formation of an additional signal to sell the pound with the main goal of breaking through the major support of last week 1.2819, where I recommend fixing the profits, since it will not be possible to break below this range just like that. In the scenario of a lack of activity on the part of bears and the pound's growth above the resistance of 1.2965 in the second half of the day, it is better not to rush to sell. Most likely, the bears will resort to protecting only the new high of 1.3029, where it is best to wait for the formation of a false breakout before opening short positions. It will be possible to sell GBP/USD immediately for a rebound only from a large resistance of 1.3089, based on a correction of 30-40 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for September 29 recorded a sharp increase in short positions and a reduction in long ones, which affected the net position and led to its larger negative value. This once again confirms the desire of traders to build up short positions with any increase in the level in the expectation of uncertainty with Brexit and the prospects for the recovery of the British economy. The pressure on the pound will gradually increase as the second wave of coronavirus spreads. During the reporting week, there was an increase in short non-commercial positions from the level of 40,523 to the level of 51,961. Long non-commercial position decreased from 43,487 to the level of 39,216. As a result, the non-commercial net position became negative and amounted to -12,745, against 2,964 a week earlier, which indicates a gradual return of the market to their control by major sellers.
Signals of indicators:
Moving averages
Trading is conducted around 30 and 50 daily averages, which indicates some market uncertainty.
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 classic daily moving averages on the daily chart D1.
Bollinger Bands
If the pound rises, the upper limit of the indicator in the area of 1.3010 will act as a resistance.
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 9Bollinger Bands (Bollinger Bands). Period 20Non-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.