FX.co ★ GBP/USD: trading plan for European session on October 11. GBP prints higher high

Yesterday, GBP/USD generated several excellent market entry signals. Let's look at the 5-minute chart and analyze what happened there. In my previous forecast, I paid attention to the level of 1.2210 and recommended making decisions on entering the market from there. The decline and a false breakout at 1.2210 made it possible to obtain a good entry point, betting on a further recovery of GBP/USD. As a result, the instrument increased by more than 40 pips. The breakout and consolidation above 1.2256 also gave a signal to build up long positions, which resulted in an upward movement of another 20 pips. In the afternoon, protection at 1.2256 and a false breakout created another entry point for buying the pound. Eventually, GBP/USD grew by another 30 pips.

What is needed to open long positions on GBP/USD

The publication of the minutes of the Bank of England meeting had a positive impact on the pound sterling, as did the speeches of the Monetary Policy Committee representatives. It is obvious that the buyers have a rather significant advantage. In order to consolidate it, they need to stay above the important support of 1.2256, formed yesterday, where the moving averages also play on the side of the bulls. I would prefer to act after a decline and a false breakout in the area of 1.2256, which will produce a buy signal with the aim of a breakout to a new high in the area of 1.2303, which was tested today during the Asian session. A breakout and consolidation above this range amid the empty economic calendar for the UK will allow the buyers to cement their new bullish trend, giving them a chance to update 1.2342. The highest target will be the area of 1.2380, where I will take profits. In the scenario of a decline to 1.2256 and the absence of activity there, GBP/USD is expected to trade within the sideways channel, and things will not go well for the buyers of the pound again. This will also open the way to 1.2213. A false breakout there will give a signal to open long positions. I plan to buy GBP/USD immediately for a rebound only from the low of 1.2164, bearing in mind a correction of 30-35 pips within the day.

What is needed to open short positions on GBP/USD

The bears need to push the price below 1.2256 as quickly as possible since the current situation casts great doubt on the seller's ability to regain the trend. In case of further bullish activity, only a false break of the nearest resistance at 1.2303 will give a sell signal that could push the pair towards 1.2256. A breakout and reverse test from the bottom to the top of this range will deal a more serious blow to the positions of the bulls, opening the way to the low of 1.2213. A more distant target will be 1.2164, where I will take profit. If GBP/USD grows and there is no activity at 1.2303 in the first half of the day, and most likely this will be the case, demand for the sterling will only increase, which will give the buyers a chance to continue the upward correction. In this case, I will postpone selling until a false breakout at 1.2342. If a downward movement occurs, I will sell the pound immediately during a rebound from 1.2380, but only in anticipation of a downward correction by 30-35 pips within the day.

In the COT (Commitment of Traders) report for October 3, we see a decrease in long positions and, in parallel, a very large increase in short positions. This suggests that buyers of the pound sterling are becoming less numerous, especially after a series of disappointing UK economic growth statistics and strong US data indicating the need for further interest rate hikes, making the US dollar more attractive in the medium term. The situation that is currently brewing up in the Middle East, although it does not greatly affect the British pound, still scares investors away from the risky assets to which it belongs, maintaining the luster of the US dollar as a safe-haven asset. The latest COT report said that long non-commercial positions fell by 10,839 to 73,911, while short non-commercial positions increased by 11,510 to 80,591. As a result, the spread between long and short positions narrowed by 629. GBP/USD closed last Friday lower at 1.2091 versus 1.2162 in the previous week.

Indicators' signals

Moving Averages

The instrument is trading above the 30 and 50-day moving averages. It indicates that the buyers are pushing GBP/USD up.

Note: The period and prices of the moving averages are considered by the analyst on the 1-hour chart and differ from the general definition of classic daily moving averages on the daily chart.

Bollinger Bands

In case GBP/USD goes up, the indicator's lower border at about 1.22235 will act as support.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial 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 short and long positions of non-commercial traders.