GBP/USD: trading plan for the US session on October 31st (analysis of morning trades). The pound is rising amid the general weakness of the US dollar

In my morning forecast, I pointed out the level of 1.2172 and recommended using it as a reference for market entry decisions. Let's take a look at the 5-minute chart and analyze what happened there. The rise and formation of a false breakout at this level provided an excellent entry point for short positions, but the downward movement never materialized, resulting in losses from the trade. The technical outlook was slightly revised for the second half of the day.

To open long positions on GBP/USD:

It's evident that traders are favoring risky assets ahead of tomorrow's Federal Reserve meeting, as everyone expects the regulator to keep interest rates unchanged or even conclude their rate hike cycle. This is impacting traders' sentiments towards the pound, expecting a decrease in inflation in the UK, similar to the Eurozone. As for today, during the American session, there will be a lot of US economic data to watch. Data on the consumer confidence index and the US housing price index could lead to a significant correction in the pound, as well as positive figures related to the S&P/Case-Shiller 20-city home price index and the Chicago PMI. If this happens, I expect buyers to emerge around 1.2168. I will only open long positions after a false breakout occurs there, with the target of retesting resistance at 1.2204. A breakthrough and consolidation above this range, with weak data, will boost buyers' confidence and signal the opening of long positions with a target of 1.2243. The ultimate target will be the 1.2285 area, where I will make a profit. In the scenario of a pair's decline and a lack of activity at 1.2168 in the second half of the day, only a false breakout around the daily minimum of 1.2136 will provide a signal to open long positions. I plan to buy GBP/USD immediately on a rebound from 1.2100, with the target of a 30-35 point correction within the day.

To open short positions on GBP/USD:

Sellers did not show much activity in the first half of the day, and before opening short positions at 1.2204, we'd like to ensure their presence. Only a false breakout there, along with strong statistics about the US economy, will provide a selling signal capable of pushing the pair towards the nearest support at 1.2168, which was serving as resistance in the morning. A breakthrough and a bottom-up retest of this range will deal a more significant blow to the bull positions, opening the way to 1.2136, where the moving averages are favoring buyers. The more distant target will be the 1.2100 minimum, where I will take a profit. In the event of GBP/USD rising and a lack of movement down to 1.2204 in the second half of the day, the demand for the pound will remain, and buyers will have a chance to build a short-term uptrend. In this case, I will delay selling until a false breakout at 1.2243. If there's no downward movement there, I will sell GBP/USD immediately on the rebound from 1.2285, but only with the expectation of a pair correction down by 30-35 points within the day.

In the Commitment of Traders (COT) report for October 24, both long and short positions increased, changing the balance of power in favor of sellers. Weak data on the UK economy continues to be released, indicating a real slowdown in economic growth. The reduced activity in both the manufacturing and services sectors in September of this year serves as direct evidence of this. However, this week, the Federal Reserve System of the United States will hold a meeting at which it is likely to decide to maintain its policy without changes, which will favor the British pound. But considering the post-US data, it's possible that committee members might hint at the possibility of one final rate hike in December this year, which would strengthen the dollar. In the latest COT report, it's noted that long non-commercial positions increased by 1,582 to 67,119, while short non-commercial positions rose by 9,009 to 85,755. As a result, the spread between long and short positions increased by 924. The weekly closing price decreased and stood at 1.2165 against 1.2179.

Indicator signals:

Moving Averages

Trading is conducted above the 30 and 50-day moving averages, indicating the potential for further pound growth.

Note: The author uses the 30 and 50-period moving averages on the 1-hour chart (H1), which differs from the general definition of classical daily moving averages on the daily chart (D1).

Bollinger Bands

In case of a decline, the lower boundary of the indicator around 1.2135 will serve as support.

Indicator descriptions:

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 - convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.Bollinger Bands. Period 20.Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting specific requirements.Long non-commercial positions represent the total long open positions of non-commercial traders.Short non-commercial positions represent the total short open positions of non-commercial traders.The total non-commercial net position is the difference between the short and long positions of non-commercial traders.