In the morning article, I turned your attention to 1.1302 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. A decline and false breakout of 1.1302 occurred quite quickly. It led to a buy signal. The pound sterling rose by more than 40 pips. Shortly after, the pressure on the pair returned following weak PMI data. It slid below 1.1302. However, there was no sell signal there. For the afternoon, the technical outlook was revised.
When to open long positions on GBP/USD:
In the afternoon, the US is scheduled to unveil the same data, namely the Services PMI, Manufacturing PMI, and the Composite indices. These reports are sure to impact market sentiment. analysts believe that US PMI figures will be better compared to the UK's. If so, the US dollar will grow higher. Traders are looking forward to the speech of Treasury Secretary Janet Yellen. In her comments on inflation, she may once again support the Fed's monetary tightening. It would be appropriate to open long positions only after a false breakout of the support level of 1.1274 where the moving averages are passing in positive territory. It could give a buy single with the prospect of a rise to the new resistance level of 1.1342 formed in the morning. Depending on the movements from this level, the pair could maintain its Friday rally or get stuck in the sideways channel. A breakout and a test of 1.1342 will generate a buy signal with the likelihood of a rise to a weekly high of 1.1403. A breakout and a downward test of 1.1403 will open the path to 1.1488 where I recommend locking in profits. If GBP/USD declines following strong US data and Janet Yellen's hawkish comments and bulls show no activity at 1.1274, the pressure on the pound will escalate. In this case, it is better to postpone long positions until a false breakout of 1.1210 takes place. You can buy GBP/USD immediately at a bounce from 1.1137 or 1.1066, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
Bears are trying really hard to take control of the market after weak data. However, the downward movement has been quite modest today. Now, their main task is to protect the resistance level of 1.1342, especially if the US data turns out to be worse than economists' forecasts. It is better to open short positions after a false breakout. It will give a sell signal with the prospect of a decrease to a low of 1.1274. A breakout and an upward test will provide a good sell signal. The pair could tumble to 1.1210 where buyers may enter the market. A more distant target will be the 1.1137 area where I recommend locking in profits. If GBP/USD rises and bears show no energy at 1.1342 during the American session, the bulls will try to regain the upper hand. If so, they are likely to push the pair to the resistance level of 1.1403. Only a false breakout of this level will give an entry point into short positions with the prospect of a new downward movement. If there is no fight for this level, you can sell GBP/USD immediately at a bounce from 1.1488, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report from October 11 logged a sharp drop in short positions and an increase in long ones. The Bank of England's intervention caused sharp market moves. Now, traders are expecting the pound sterling to climb in the medium term. Recently, the regulator decided to halt its bond-buying program known as the QT (Quantitative Tightening) to enable recovery in the domestic bond market following a slump due to the fiscal policy of former British Premier Liz Truss. However, GBP is unlikely to show a steady rise in the median term due to a looming recession and further aggressive monetary tightening by the Federal Reserve that will make the US dollar more attractive. According to the last COT report, long non-commercial positions grew by 6,901 to 48,979 whereas short non-commercial positions dropped by 3,468 to 88,149. As a result, the negative value of overall non-commercial positions slightly contracted to -39,170 against -49,539 a week ago. GBP/USDS closed last week lower at 1.1036 against 1.1491 in the previous week.
Indicators' signals:
Trading is carried out above the 30 and 50 daily moving averages. It indicates that the bulls are making efforts to take control.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If GBP/USD moves up, the indicator's upper border at 1.1365 will serve as resistance.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9Bollinger Bands (Bollinger Bands). Period 20Non-commercial 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.