In my morning forecast, I paid attention to the 1.1245 level and recommended deciding on entering the market there. Let's look at the 5-minute chart and figure out what happened. The decline and false breakdown in this range led to an excellent buy signal, which increased by more than 40 points. However, I did not wait for the rapid recovery of the pair. The technical picture was not revised for the second half of the day.
To open long positions on GBP/USD, you need:
The planned fundamental statistics for the United States will not be able to reverse the pressure on the pound even if they come out good enough. Hence, buyers have every chance of continuing to build an upward trend – especially after they defended the morning support of 1.1245, which I again advise you to focus on. In the case of a decline in the pair, only the repeated formation of a false breakdown at 1.1245, by analogy with what I discussed above, will allow you to enter long positions in the continuation of the upward correction. The movement's goal will be 1.1328, the breakthrough of which will only occur if the British Prime Minister finds a way out of the current situation and can somehow correctly solve the problem of an inflated budget deficit. A breakout and a top-down test of 1.1328 will create a direct road to the 1.1420 area, strengthening the bull market. Going beyond this level will allow you to test 1.1488, where I recommend fixing the profits. In the scenario of the GBP/USD falling against strong statistics, the absence of buyers at 1.1245, and moving averages playing on the buyers' side, the pressure on the pound will increase. In this case, I recommend postponing long positions to 1.1166. I recommend that you only buy there if you have a false breakdown. It is possible to open long positions on GBP/USD immediately for a rebound from 1.1098 or in the minimum of 1.1031 with the aim of a correction of 30–35 points within a day.
To open short positions on GBP/USD, you need:
The bears did their best but failed to gain a foothold below 1.1245. The optimal scenario for selling remains a false breakdown in the resistance area of 1.1328, to which the pair is now heading. This will allow you to build the upper boundary of the new descending channel. The target, in this case, will be the nearest support of 1.1245, which the bears have been unable to control. Only a breakthrough and a reverse test from the bottom up of this range will give a good entry point with an exit to a minimum of 1.1166, for which buyers will again begin to fight actively. The farthest goal will be the 1.1098 area, where I recommend fixing the profits. With the option of GBP/USD growth and the absence of bears at 1.1328 during the Asian session, bulls will continue to return to the market in hopes of leveling the situation and updating monthly highs. This should push the pair to the 1.1420 area. Only a false breakout at this level will give an entry point into short positions with the aim of a new downward movement. In case of a lack of activity there, I advise you to sell GBP/USD immediately for a rebound from 1.1488, counting the pair's rebound down by 30-35 points within a day.
The COT report (Commitment of Traders) for October 4 recorded a sharp reduction in both long and short positions. The report has already recorded that the pound fell by more than 10% in two days and then a sharp recovery against the background of the intervention of the Bank of England. Now that the situation has stabilized, it is clear that those who want to buy and sell the pound have sharply decreased. Remember that the previous tax-cut plan failed, and the pound is unlikely to recover further. Activity in the UK private sector and the service sector continues to decline, which also does not add confidence to investors. A lot will depend on the Fed's policy, which is directly related to the US inflation report expected this week.
For this reason, I do not bet on further growth of the pound in the current conditions and prefer the US dollar. The latest COT report indicates that long non-commercial positions decreased by 17,753 to 42,078. In contrast, short non-commercial positions decreased by 14,638 to 91,617, which led to a slight reduction in the negative value of the non-commercial net position to -49,539, against -46,424. The weekly closing price recovered, and it was 1.1494 against 1.0738.
Signals of indicators:
Moving Averages
Trading is conducted above the 30 and 50-day moving averages, indicating an attempt by the bulls to continue the pound's growth.
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 the event of a decline, the lower limit of the indicator, around 1.1160, 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 9Bollinger Bands (Bollinger Bands). Period 20Non-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.