In my morning forecast, I drew attention to the level of 1.2390 and recommended using it as a reference for trading decisions. Let's examine the 5-minute chart and analyze what happened there. The rise and the formation of a false breakout at this level provided an excellent entry point for short positions, but after a 15-point downward movement, demand for the pound returned, as the bull market for the pound has not been canceled. The technical picture was slightly revised for the second half of the day.
To open long positions on GBP/USD:
Considering the absence of fundamental statistics from the United States, buyers of the pound still have every chance to continue the bull market. I expect their initial presence in the area of the new support at 1.2394, which was formed during the first half of the day. Protection and the formation of a false breakout in this range will provide an entry point for long positions with the aim of updating the resistance at 1.2425, which we didn't reach in the first half of the day. Breaking and consolidating above this range will allow buyers to feel more confident in the market, signaling the opening of long positions with an exit at 1.2459. The ultimate target will be the area of 1.2502, where I will make a profit. In the scenario of a pair's decline and a lack of activity from buyers at 1.2394 in the second half of the day, only a false breakout in the area of the next support at 1.2365 will signal an entry into long positions. I plan to buy GBP/USD immediately on a rebound only from 1.2334, with the target of a 30-35 point correction within the day.
To open short positions on GBP/USD:
Sellers may lose control of the market completely if they miss the nearest resistance at 1.2425. Only a false breakout will provide an opportunity for correction and a signal to open short positions early in the week, expecting a move to support at 1.2394. Breaking and retesting from the bottom-up of this range will deal a more serious blow to buyers' positions, triggering stop-loss orders and opening the way to 1.2365. The next target will be the area of 1.2334, where I will take a profit. In the case of GBP/USD's rise and the absence of activity at 1.2425 in the second half of the day, which seems to be the case, demand for the pound will strengthen, and buyers will have a chance to establish a further upward trend. In such a case, I will postpone selling until a false breakout at 1.2459. If there is no downward movement there, I will sell GBP/USD immediately on a rebound from 1.2502, but only in anticipation of a pair's downward correction of 30-35 points within the day.
In the Commitment of Traders (COT) report for October 24, there was an increase in both long and short positions, which changed the balance of power in favor of sellers. Weak data indicating a real slowdown in the pace of economic growth in the United Kingdom continues to emerge. The decline in activity in the manufacturing and service sectors in September of this year is direct evidence of this. However, the Federal Reserve System of the United States will hold a meeting this week, and it is likely that they will make a decision to maintain their policies unchanged, which will play in favor of the British pound. But considering the data from the United States, it is not excluded that the committee members will hint at the possibility of one more rate hike in December this year, which will strengthen the dollar. The latest COT report states that long non-commercial positions increased by 1,582 to a level of 67,119, while short non-commercial positions jumped by 9,009 to a level of 85,755. As a result, the spread between long and short positions increased by 924. The weekly 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 growth of the pound.
Note: The author considers the period and prices of moving averages on the hourly chart H1, which differs from the standard definition of daily moving averages on the daily chart D1.
Bollinger Bands
In the event of a decline, the lower boundary of the indicator around 1.2350 will act as support.
Indicator Descriptions:
• Moving Average (determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.
• Moving Average (determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.
• 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, who use the futures market for speculative purposes and meet certain 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 short and long positions of non-commercial traders.