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 1.2505 as a possible entry point. A decline to this level and its false breakout generated a buy signal, thus pushing the price up by more than 30 pips. Following a rapid decline in the second half of the day, strong buying activity at the support of 1.2463 created another entry point into long positions, facilitating another rise of 30 pips.
For long positions on GBP/USD
Strong US data served as the main catalyst for the sharp decline of the pound in the latter half of yesterday. However, the downward movement was quickly offset by the buyers, maintaining prospects for further short-term growth of the pair. Much will depend today on the UK's manufacturing PMI, services sector PMI, and composite PMI data. Weak indicators will put pressure back on the pair, forcing buyers to defend the nearest support at 1.2489, established yesterday. Only a false breakout there will provide an entry point for long positions to develop the upward trend and retest the nearest resistance at 1.2524. A breakout and consolidation above this range will lead to a new signal for opening long positions with a target at 1.2556. The furthest target will be the 1.2593 area, where I plan to take profits. If the pair falls and there is no buying activity at 1.2489, the pressure on the pair will definitely increase, and bears will regain control. In this case, only a false breakout around the next support at 1.2451 will signal opening long positions. I plan to buy GBP/USD immediately on a rebound from 1.2417, aiming for an intraday correction of 30-35 pips.
For short positions on GBP/USD
Sellers asserted their presence but failed to gain total control of the market. I plan to sell GBP/USD only after forming a false breakout near the high of 1.2524, which will give bears a chance to move the price down to the support at 1.2489, just above which the moving averages are located. Only a breakout and a retest from below will deal a more serious blow to the buyers' positions, leading to the removal of stop orders and opening the way to 1.2451. The further target will be the 1.2417 area, where I will take profits. If GBP/USD rises and there is no activity at 1.2524 in the first half of the day, bulls might try to continue the uptrend, setting the stage for a bullish trade. In such a case, I will postpone sales until the price performs a false breakout at 1.2556. If there is no downward movement there, I will sell GBP/USD immediately on a rebound from 1.2593, considering a downward correction of 30-35 pips within the day.
COT report
The Commitments of Traders (COT) report for November 14 showed a decrease in long positions and an increase in short ones, but this did not significantly alter the balance in the market. Pressure on the pound is gradually decreasing, which is not surprising given the rapid fall in inflation in both the UK and the US. The chances that the Bank of England will continue to raise interest rates are almost zero. This is aiding risk assets and weakening the position of the US dollar. Ahead of us is the November minutes of the Federal Reserve meeting, which could clarify many uncertainties, potentially leading to another wave of strengthening of the British pound and its consolidation at monthly highs. The more discussions there are about the possibility of US rates remaining unchanged in December, the greater the pressure on the US dollar and, consequently, the stronger the pound. The latest COT report indicates that non-commercial long positions decreased by 4,735 to 52,797, while non-commercial short positions increased by 6,743 to 80,527. As a result, the spread between long and short positions narrowed by 190. The weekly closing price rose to 1.2503, up from the previous value of 1.2298.
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 1.2460 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.