Yesterday, the pair formed several entry signals. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2161 as a possible entry point. A rise to this level and its false breakout generated a good entry point into short positions, leading to a slump of more than 40 pips. In the afternoon, the pair repeated this trajectory, and increased bearish presence at 1.2161 allowed us to close positions with additional 40 pips in profit.
For long position on GBP/USD:
The Federal Reserve's decision to maintain interest rates unchanged came as no surprise to market participants, but the indication that the rate-hike cycle could potentially conclude by December this year was an unexpected development. This revelation spurred an increase in demand for risk assets, including the British pound. Today's interest rate decision by the Bank of England and Governor Andrew Bailey's address could bolster the pound, as a dovish stance by the regulator is likely to benefit the economy. However, initial market reactions may favor sellers, making the defense of the 1.2161 support level a priority for buyers. A false breakout at this level could provide an entry point for long positions with an aim to challenge the week-long resistance at 1.2197. A breakthrough and consolidation above this range could give a signal for buyers to re-enter the market, aiming for a renewal of 1.2230 and potentially targeting the 1.2258 zone where profits could be secured. Should the pair decline and buyers show no initiative at 1.2161, only a false breakout near the intermediate support at 1.2127 — slightly above which the moving averages converge — would signal the initiation of long positions.I plan to purchase GBP/USD immediately on a rebound from 1.2097, aiming for a correction of 30-35 pips within the day.
For short positions on GBP/USD:
Sellers are retaining control with the anticipation of dovish statements from the Bank of England and ongoing combat against inflation. It's crucial for them not to miss the nearest resistance at 1.2197, which represents the upper boundary of the sideways channel and is a focal point for buyers in the first half of the day. Only a false breakout at this level would signal a selling opportunity, potentially pushing the pair back to the support at 1.2161, where the moving averages play in favor of the bulls. A breakout and a bottom-up retest of this range would deal a significant blow to bullish positions, lead to a cascade of stop orders, and open a path to 1.2127. A further target lies at the 1.2097 zone, where profits are intended to be captured. If GBP/USD rises and there is a lack of activity at 1.2197 in the first half of the day — which seems plausible — demand for the pound will return, giving buyers a chance to construct an ascending correction. Under such circumstances, sales would be deferred until a false breakout at 1.2230. If there is no downward movement there, I would sell GBP/USD immediately on a bounce from 1.2258, targeting a 30-35 point correction within the day.
COT report
The Commitments of Traders report for October 24 indicated a rise in both long and short positions, tilting favor towards sellers in the GBP/USD pair. UK economic data remains weak, evidenced by reduced activity in both the manufacturing and services sectors, which points to a slowdown in economic growth. At the upcoming meeting this week, the Federal Reserve is likely to leave its monetary policy unchanged, potentially supporting the pound. However, recent strong US data could lead to hints about a possible rate hike in December, thus strengthening the US dollar. Non-commercial long positions went up by 1,582 to 67,119 while non-commercial short positions jumped by 9,009 to 85,755, increasing the spread by 924 positions. The weekly closing price declined to 1.2165 from 1.2179.
Indicator signals:
Moving Averages
Trading around the 30- and 50-day moving averages indicates a range-bound market.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If the pair declines, the lower band of the indicator at 1.2120 will act as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.