To open long positions in GBP/USD you should:
In my morning forecast, I paid special attention to the resistance at 1.2915, considering it to be a good level to open short positions from in case of a breakout. In fact, everything happened in line with my forecast. Now, let's take a look at the M5 time frame and analyze the moment of entry into short positions. Bears have tested the level of 1.2915 bottom-up once again. As a result, a relatively convenient entry point appeared. We can set a Stop Loss order from this mark. Consequently, it leads to an instant sell-off of the pound to the low of 1.2865, where I suggested to place a Take Profit. Positive UK's manufacturing PMI data gave strength to bulls. Nevertheless, I failed to open long positions from this level since the formation of a false breakout - a test of the 1.2865 level from top-down - had not been confirmed. I marked the area where this test could take place on the chart.
Even though the price movement in the first half of the day was quite strong, from a technical point of view, practically nothing has changed. Buyers should defend the support level of 1.2905. Trading is currently taking place above this level. A return of the price to this level after such a significant drop in the first half of the day indicates the presence of a major player. As long as trading remains above this range, the chances after high that GBP/USD will be able to recover. The next formation of a false breakout there will give a buy signal. Thus, long positions may be considered in the area of the 1.2984 high where you should set a Taking Profit order. I'd rather refrain from opening long positions if there is no buying activity around the level of 1.2905 in the afternoon and a positive ISM Manufacturing PMI report. A false breakout in the support area of 1.2856 will give a buy signal to open long positions against the trend. I suggest buying the pound immediately on a rebound from the low of 1.2807, tacking into account a correction of 15-20 pips within the day.
To open short positions in GBP/USD you should:
Bulls should return the level of 1.2905. If the pair consolidates below the mark it will again bring the pair under pressure and lead to the resumption of the bear market. The initial target will be the low of 1.2856, which has withstood bearish pressure for the fifth time in the last month. Only consolidation below this range will increase the pressure on the pound and lead to a larger sell-off to the 1.2807 low, where I suggest taking profits. In the second half of the day, if the GBP/USD rises after the data on manufacturing business activity in the US is published, it is best to wait for the test of the 1.2984 high and sell the pound immediately on a rebound, taking into account a correction of 20-30 pips within the day.
As for the Commitment of Traders (COT) report for October 27, both the number of short and long positions decreased. Long non-commercial positions fell to 31,799 from 39,836. At the same time, short non-commercial positions dropped to 38,459 from 41,836. As a result, the negative non-commercial net position was at -6,660, against -2,000 in the previous week, indicating sellers' dominance in the current situation.
Indicator signals:
Moving averages
Trading takes place slightly below the 30 and 50 day averages which indicates bearish control of the market.
Note: The period and prices of moving averages are considered by the author of the article on the hourly chart and differ from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
In case of an upward correction, the upper border of the indicator in the area of 1.2970 will act as resistance, from which the pound can be sold.
Description of indicators
Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
MACD indicator (Moving Average Convergence/Divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
Bollinger Bands. Period 20
Nonprofit traders are speculators 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.
Non-commercial short 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.