FX.co ★ GBP/USD: trading plan for the US session on October 17th (analysis of morning deals). The pound declined after the data

In my morning forecast, I emphasized the level of 1.2185 and recommended making trading decisions based on it. Let's take a look at the 5-minute chart and analyze what happened there. A breakout and a subsequent retest of this range generated a sell signal, resulting in a significant drop and allowing traders to capture about 40 points in profit. Buying on a false breakout from 1.2154 yielded a profit of 20 points. The technical picture was reassessed for the second half of the day.

To open long positions on GBP/USD, the following is required:

We have very important reports on changes in retail sales and industrial production in the United States ahead, which could lead to further declines in the pair, especially if the data exceeds economists' forecasts. Speeches by FOMC members John Williams and Michelle Bowman should not be disregarded either. In the event of further downward movement of the pound, I expect buyers to emerge only around the support level of 1.2147. It is better to act there after a false breakout, similar to what I discussed earlier. This would provide a buy signal with an attempt to recover the pair to around 1.2181, which has become a new resistance level after the first half of the day. This level is also where the moving averages, which favor sellers, intersect. A breakout and consolidation above this range will allow buyers to regain control, while a retest from top to bottom will signal a buy opportunity with a renewed target at 1.2214. The furthest target will be around 1.2267, where I will take profits. In the scenario of a drop to 1.2147 with no activity there in the second half of the day, things will look grim for pound buyers. This would open the path to 1.2109. Only a false breakout would provide a buy signal. I plan to buy GBP/USD on a rebound only from the minimum of 1.2071, targeting a correction of 30-35 points within the day.

To open short positions on GBP/USD, the following is required:

In the event of an upward movement in the pair, bears should defend the nearest resistance at 1.2181, where moving averages that favor sellers are also present. Only a false breakout at this level, combined with strong data on retail sales growth in the United States in September of this year, will provide a selling entry point capable of pushing the pair to 1.2147. A breakout and retest from bottom to top of this range will deal a more serious blow to buyer positions, opening the path to 1.2109. The more distant target will be 1.2071, where I will take profits. In the scenario of GBP/USD rising and no activity at 1.2181 in the second half of the day, trading will remain within a sideways channel. In such a case, I will postpone selling until a false breakout occurs at 1.2214, which is the upper boundary of this channel. If there is no downward movement, I will sell the pound on a rebound only from 1.2267, but with the expectation of a downward pair correction of 30-35 pips within the day.

In the COT (Commitment of Traders) report for October 10, there was a reduction in both long and short positions. This only indicates that traders have made some adjustments to their positions ahead of an important report on inflation in the United States, which was released at the end of the previous week. Considering the continued rise in US prices, it is likely to have a negative impact on the Federal Reserve and its interest rate decisions. So, despite the pound's fairly good upward correction, it could end with another significant sell-off and a drop in the pair with a renewed monthly low. Many Federal Reserve representatives are speaking this week, which will be our guide. According to the latest COT report, long non-commercial positions decreased by 7,621 to 66,290, while short non-commercial positions fell by 4,253 to 76,338. As a result, the spread between long and short positions decreased by 836. The weekly price increased and reached 1.2284, compared to 1.2091.

Indicator Signals:

Moving Averages

Trading is taking place below the 30 and 50-day moving averages, indicating further decline in the pair.

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

Bollinger Bands

In case of a decline, the lower boundary of the indicator around 1.2150 will act as support.

Description of indicators:

• Moving average (a moving average that determines the current trend by smoothing out volatility and noise). Period 50. Marked on the chart in yellow.

• Moving average (a moving average that determines the current trend by smoothing out 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 using the futures market for speculative purposes and meeting specific 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 the short and long positions of non-commercial traders.