FX.co ★ GBP/USD: plan for the American session on October 5

To open long positions on GBP/USD, you need:

In the first half of the day, buyers of the pound managed to push off from the support level of 1.2897 after the release of a fairly good final indicator on the activity of the UK service sector. In my morning forecast, I paid attention to the level of 1.2897 and recommended opening long positions from it.

From a technical point of view, nothing has changed for the second half of the day. Buyers of the pound need to get out of the side channel in which the pair spent the entire past week. If they manage to protect 1.2897 in the morning, now they need a break and consolidation above 1.2975, which will be a signal to open long positions. A breakout of 1.2975 will lead to the demolition of a number of sellers' stop orders and strengthen the pair's correction to the area of the highs of 1.3029 and 1.3089, where I recommend fixing the profits. In the scenario of a repeated decline in the pair, the emphasis will again be placed on protecting the middle of the channel 1.2897. However, only the formation of a false breakout will be a signal to open long positions. If there is no activity from the bulls at this level, and it is quite possible that weak good data on activity in the US services sector will scare off new buyers, I recommend not to rush with purchases, but to wait for the test of the lower border of the side channel 1.2819 and buy the pound for a rebound, counting on a correction of 30-40 points within the day.

To open short positions on GBP/USD, you need:

Sellers again need to protect the resistance of 1.2975, where the formation of a false breakout will be a signal to open short positions in the expectation of a resumption of the bear market. An equally important task remains to consolidate below the middle of the side channel 1.2897, which was not possible in the first half of the day. Only this option will lead to the formation of an additional signal to sell the pound with the main goal of breaking through the major support of last week 1.2819, which will lead to a more serious wave of movement of GBP/USD down to the area of 1.2754 and 1.2689, where I recommend fixing the profits. In the scenario of the pound's growth above the resistance of 1.2975, it is better not to rush to sell, as the market may shift to the side of buyers. Most likely, the bears will resort to the protection of the resistance of 1.3029 or they will be able to sell GBP/USD immediately for a rebound from the maximum of 1.3089 in the expectation of a correction of 30-40 points within the day.

Let me remind you that the COT reports (Commitment of Traders) for September 29 recorded a sharp increase in short positions and a reduction in long ones, which affected the net position and led to its larger negative value. This once again confirms the desire of traders to build up short positions with any increase in the level in the expectation of uncertainty with Brexit and the prospects for the recovery of the British economy. The pressure on the pound will gradually increase as the second wave of coronavirus spreads. During the reporting week, there was an increase in short non-commercial positions from the level of 40,523 to the level of 51,961. Long non-commercial position decreased from level 43,487 to level of 39,216. As a result, the non-commercial net position became negative and amounted to -12,745 against 2,964 a week earlier, which indicates a gradual return of the market to their control by large sellers.

Signals of indicators:

Moving averages

Trading is above 30 and 50 daily averages, which indicates the probability of continued growth of the pound in the short term.

Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger Bands

A break of the upper limit of the indicator in the area of 1.2966 will lead to a new wave of growth of the pair. A break of the lower limit in the area of 1.2915 will increase the pressure on the pound.

Description of indicators

• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
• MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
• Long non-commercial positions represent the total long open position of non-commercial traders.
• Short non-commercial positions represent the total short open position of non-commercial traders.
• Total non-commercial net position is the difference between the short and long positions of non-commercial traders.