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 1.2268 as a possible entry point. A decline and false breakout at this mark produced a great buy signal, sending the pair up by 35 pips. The bears' active defense of 1.2305 and a false breakout on that mark produced a sell signal. As a result, the pair fell by 50 pips. In the afternoon, buying at 1.2242 on a false breakout sent the pair up by more than 20 pips, but then the pressure on the pair returned.
For long positions on GBP/USD:
Yesterday, Federal Reserve Chairman Jerome Powell made it clear that a rate cut was out of the question, saying that the central bank would raise interest rates if necessary. This exerted pressure on the pound, and the pair may extend its downward movement today. Traders may look to the release of data on UK Q3 GDP and industrial output, which may turn out to be disappointing reports. If the economy shrinks in the third quarter, the pound will continue to fall actively. Therefore, only a false breakout at 1.2215 will provide an entry point for long positions with an aim to challenge the resistance at 1.2252, which is in line with the bearish moving averages. Only good GDP data will allow a breakout and consolidation above this range, giving buyers a chance to return to the market and produce a buy signal, potentially targeting the 1.2293 area. The ultimate target is found at 1.2335 where I will be taking profits. Should the pair decline and buyers show no initiative at 1.2215, only a false breakout near the next support level at 1.2187 will signal the opportunity to open long positions. I plan to buy GBP/USD immediately on a rebound from 1.2157, aiming for a correction of 30-35 pips within the day.
For short positions on GBP/USD:
The bears have already achieved their goal and now the pair is trading in the area of the next weekly low. The objective is to defend the nearest resistance at 1.2252, the pair could reach this mark after the release of UK data. This is also in line with the bearish moving averages. A false breakout at 1.2252 will generate a sell signal with a movement towards the support level at 1.2215. Breaching this level and subsequently retesting it from below will deal a more serious blow to the bulls' positions, lead to a cascade of stop orders, and open a path to 1.2187. The more distant target will be 1.2157, where I'd be taking profits. If GBP/USD grows and there are no bears at 1.2252, the bulls will get a chance to recover their positions at the end of the week. In that case, I will postpone selling until a false breakout at 1.2293. If downward movement stalls there, one can sell the British pound on a bounce from 1.2335, bearing in mind a 30-35-pips downward intraday correction.
COT report:
The Commitments of Traders report for October 24 indicated a decline in both long and short positions, but this did not change the balance of power, as the data does not take into account the latest report on the state of the US labor market. The market had almost no reaction to the fact that the US Federal Reserve left the policy unchanged, but the reaction to the weak job figures supported the pound's sharp growth at the end of last week, which may affect the pair's trend in the medium-term. Talk that US interest rates may remain unchanged this December, due to early signs of weakness in the economy, will exert more pressure on the US dollar and boost the pound. Non-commercial long positions fell by 3,407 to 63,712 while non-commercial short positions fell by 1,672 to 84,083, increasing the spread by 210 positions. The weekly closing price declined to 1.2154 from 1.2165
Indicator signals:
Moving Averages
The instrument is trading below the 30 and 50-day moving averages. It indicates that GBP/USD is likely to decline lower.
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 GBP/USD declines, the indicator's lower border near 1.2187 will serve 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.