GBP/USD: plan for the European session on November 11. COT reports. The pound rose by more than 300 points

Yesterday was not the most productive day for trading the British pound, but we still managed to get a signal to enter the market. Let's take a look at the 5-minute chart and see what happened. Earlier, I asked you to pay attention to 1.1417 to decide when to enter the market. Unfortunately, we did not reach any of the levels I mentioned in the morning, so I did not see any signals to enter the market. After the pound rapidly rose amid declining inflation in the US, only a breakout and reverse test downwards of the 1.1640 level closer to the middle of the US session led to a buy signal, which resulted in a new wave of growth, making it possible to take about 80 points of profit.

The fact that inflation in the US has sharply decreased, and turned out to be much better than economists' forecasts, allows us to count on the fact that the Federal Reserve will seriously think about suspending aggressive interest rate hikes next year. Also, rate forecasts may be revised at the last December meeting, which contributes to the strengthening of the British pound against the US dollar and building a new medium-term bullish trend. But today, traders face a new struggle, as rather important statistics for the UK will be released. The UK GDP report for the second consecutive quarter and a sharp decline in industrial output, together with a contraction in manufacturing output, could all lead to another major sell-off in the British pound against the US dollar. At the least, if the data coincides with economists' forecasts, this will limit the pair's upward potential.

Considering all this, the best option for opening long positions in the current conditions would be when the pound falls in the area of the nearest support of 1.1629, formed on the basis of yesterday. A false breakout there will provide a buy signal in order to restore and update the resistance of 1.1722, which limits further growth. A breakout and a downward test of this range could strengthen the bulls' position, especially if the GDP data is not as bad as forecast. An exit above 1.1722 will allow bulls to build a more powerful trend with the prospect of a return to 1.1757. The farthest target will be 1.1793, where I recommend taking profits.

If the bulls do not cope with their tasks and miss 1.1629, which could happen in the morning, the pressure on the pair will sharply increase, as profit-taking will begin at the end of the week. If this happens, I advise you to buy only on a false breakout in the area of 1.1548, where the moving averages go, playing on the bulls' side. It is also possible to buy the asset just after a bounce off from 1.1473, or even lower - around 1.1408, expecting a rise of 30-35 pips.

Bears are waiting for UK data and are unlikely to show themselves seriously up to this point. Disappointing results will force the bulls to close longs, allowing the pound to correct properly. It is important to control the resistance of 1.1722, above which the pound cannot be released, otherwise the bullish trend will continue with renewed vigor. A false breakout at 1.1722 will be a good signal to open short positions, which will help push the GBP/USD back to 1.1629. A breakout and an upwards test will provide an entry point in anticipation of a return to 1.1548, where it will become much more difficult for the bears to control the market. The farthest target will be the area of 1.1473, where I recommend locking in profits. Testing this area will cross out all bullish prospects for the pound.

In case the pair grows and bears fail to protect 1.1722, the bulls will continue to enter the market. This will push the pound to 1.1757. A false breakout at this level will provide an entry point into shorts with the goal of moving down. If bears are not active there, I advise you to go short from 1.1793, expecting a decline of 30-35 pips.

The Commitment of Traders (COT) report for November 1 showed that both long and short positions decreased. Most likely, the upcoming meetings of the Federal Reserve and the Bank of England were to blame, after which the US dollar regained its appeal again, albeit only for a while. The current COT report does not yet take these decisions into account. The English central bank's decision to raise interest rates coincided with economists' forecasts, while BoE Governor Andrew Bailey said he was ready to slow down with further aggressive policies in favor of economic growth, which is declining rapidly. He also expressed concern about the crisis in the cost of living in the UK, which in the near future, due to a sharp increase in interest rates, may add to the crisis of the real estate market. Against this backdrop, the continued pace of interest rate hikes by the Fed and a more cautious position from the BoE led to a major sell-off of the pound. That all changed after data on the US labor market indicated a sharp contraction, becoming a serious reminder for the Fed at the end of the week that it needs to act more cautiously in the future. The latest COT report indicated that long non-commercial positions decreased by 8,532 to 34,979, while short non-commercial positions decreased by 11,501 to 79,815, resulting in a slight decline in the negative non-commercial net position to -44,836 against -47,805 a week earlier. The weekly closing price increased and amounted to 1.1499 against 1.1489.

Trading is performed above the 30 and 50-day moving averages, indicating a change in market direction.

Moving averages

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

Bollinger Bands

In case the pair drops, the lower limit of the indicator around 1.1473 will act as support.