GBP/USD: plan for the European session on October 19. COT report. The Bank of England has decided on the option of saving the financial market

Several not entirely successful signals for entering the market were formed yesterday. Let's take a look at the 5-minute chart and figure out what happened. I paid attention to the 1.1338 level in my morning forecast and advised making decisions on entering the market there. The decline and false breakout in this range led to an excellent buy signal, however, bulls on the pound ended before they even started. There was a 20-point upward spurt, after which the pair returned back to 1.1338 and it became clear that nothing good would come of it. A breakthrough and a reverse test from the bottom up of this range took place, but it was difficult to make a decision to sell there, since 1.1338 was "smeared" beyond recognition. In the afternoon, there was news from the Bank of England, which was surprised by rumors that it is pushing back its QT program, which led to the pound being sold. Closer to the middle of the US session, several false breakouts at 1.1328 made it possible for us to get market entry points, which showed a movement of 40 and 50 points, respectively.

Toward the end of the day, the BoE announced that it was launching QT, but for now it would keep long-term bonds on its balance sheet, which, in fact, provoked a financial collapse at the end of last month, forcing the central bank to intervene in the situation. Quite important statistics on inflation in the UK will be released today, which will exceed the mark of 10.0%, which will put temporary pressure on the pound. If the consumer price index exceeds economists' forecasts, the GBP/USD pair may react with a fall, as this will not lead to anything good - especially at a time when the BoE is trying to "sit on two chairs".

In case the pair goes down, forming a false breakout at the level of 1.1260 will give a buy signal with the aim of returning to 1.1334 – an intermediate resistance formed on the basis of today's results. A breakthrough and a downward test of this range may pull speculators' stop-orders behind it, which forms a new buy signal with growth to a more distant level of 1.1403. The bulls' farthest target will be a high of 1.1488, the update of which will put an end to the bear market seen earlier this month. If the bulls do not cope with the tasks set and miss 1.1260, the pressure on the pair will quickly return, and the market will again be locked within the horizontal channel. In this case, I advise you to buy only on a false breakout in the area of 1.1166. I recommend opening long positions on GBP/USD immediately for a rebound from 1.1098, or even lower - around 1.1031 with the goal of correcting 30-35 points within the day.

Bears are trying to regain control of the market, and they succeed. The reaction to inflation will be key. It is also worth paying attention to reports on the producer price index and the house price index in the UK. A decrease in these indicators will certainly increase pressure on the pair. Of course, the best scenario for selling would be a false breakout in the resistance area of 1.1334, a breakthrough to which may take place after the release of reports. This will make it possible for us to get a good selling point with the goal of falling to the nearest support 1.1260, formed on the basis of yesterday. A breakthrough and reverse test from the bottom up of this range will provide a good entry point with an exit to a low of 1.1166, for which bulls will again begin to actively fight. The farthest target will be the area of 1.1098, where I recommend taking profits.

In case GBP/USD grows and the absence of bears at 1.1334, the bulls will continue to return to the market, counting on offsetting the situation and updating monthly highs. A hawkish statement from BoE MPC member Catherine L. Mann could push the pair into the 1.1403 area. Only a false breakout at this level will give an entry point into short positions with the goal of a new decline. If traders are not active there, I advise you to sell GBP/USD immediately for a rebound from 1.1488, counting on the pair's rebound down by 30-35 points within a day.

The Commitment of Traders (COT) report for October 11 logged a sharp reduction in short positions and an increase in long positions. The Bank of England's intervention has affected many traders who are now betting on the strengthening of the pound in the medium term. More recently, it was reported that the central bank has decided to temporarily suspend its quantitative tightening program, better known as QT, to help the bond market recover a bit after a sharp collapse caused by the actions of British Prime Minister Liz Truss. However, one should not count on a sharp rise in the pound in the medium term, as there is an economic recession and an aggressive policy on the part of the Federal Reserve, which will make the US dollar more attractive. The latest COT report indicated that long non-commercial positions rose by 6,901 to 48,979, while short non-commercial positions decreased by 3,468 to 88,149, resulting in a slight reduction in the negative non-commercial net position to -39,170 versus -49,539. The weekly closing price dropped to 1.1036 versus 1.1494.

Trading is conducted in the area of 30 and 50-day moving averages, which indicates market uncertainty.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 chart, which differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

In case of a decline, the lower border of the indicator around 1.1295 will act as support.