FX.co ★ GBP/USD trading plan for European session on November 1, 2023. COT report and overview of yesterday's trades. GBP back to previous levels

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 1.2172 as a possible entry point. A rise to this level and its false breakout generated a good entry point into short positions. However, the pair failed to develop a downward movement, thus leading to losses. In the afternoon, confirmed bullish presence at the support of 1.2136 created a good entry point into buy positions. Yet, after a rise of 20 pips, the demand for the pound dropped rapidly, pushing the price into the sideways channel.

For long position on GBP/USD:

Strong US data yesterday exceeded economists' forecasts, leading to an active sell-off in the British pound. Sellers are now just one step away from gaining full control of market momentum, and much will depend on upcoming data from Nationwide's housing price index and the UK's manufacturing PMI index. Poor statistics could lead to a further decline in the pound, although significant volatility spikes are expected only after the Federal Reserve meeting, which we will discuss later in our afternoon forecast. In the event of continued pressure on the pair during the European session, I will act only after a false breakout occurs around the nearest support level of 1.2120 that was established yesterday. The target will be the resistance level of 1.2161, which the pair failed to reach yesterday. The moving averages favoring the sellers also run at this level. A breakout and stabilization above this range would allow buyers to re-enter the market, signaling the opening of long positions with a new target at 1.2197. The ultimate target would be the 1.2230 area, where I plan to take profits. In a scenario where the pair is declining and there is no buying activity at 1.2120, only a false breakout near the 1.2090 low would serve as a signal to open long positions. I plan to buy GBP/USD only on a rebound from 1.2065 with a correction target of 30-35 pips within the day.

For short positions on GBP/USD:

Sellers have done everything possible to re-enter the market, and they have succeeded in this. To maintain control, it is crucial for bears to assert their presence at the nearest resistance of 1.2161, established yesterday, which will be the focus for buyers in the first half of the day. Only a false breakout at this level would generate a sell signal, likely pushing the pair back to the 1.2120 support. A breakout and an upward retest of range would seriously harm the bulls' positions, opening the path to 1.2091, where I expect to see active buyer activity. The ultimate target would be the 1.2065 area, where I plan to take profits. However, testing this level is only expected in the second half of the day following the release of US data. In case of GBP/USD growth and a lack of activity at 1.2161 in the first half of the day, demand for the pound will return, and buyers will have a chance for a slight upward correction before the Federal Reserve's decision. In that case, I will postpone selling the pair until a false breakout occurs at 1.2197. If there is no downward movement there either, I will be selling GBP/USD immediately on a rebound from 1.2230, but only in anticipation of a 30-35 pips correction within the day.

COT report

The Commitments of Traders report for October 24 indicated a rise in both long and short positions, tilting favor towards sellers in the GBP/USD pair. UK economic data remains weak, evidenced by reduced activity in both the manufacturing and services sectors, which points to a slowdown in economic growth. At the upcoming meeting this week, the Federal Reserve is likely to leave its monetary policy unchanged, potentially supporting the pound. However, recent strong US data could lead to hints about a possible rate hike in December, thus strengthening the US dollar. Non-commercial long positions went up by 1,582 to 67,119 while non-commercial short positions jumped by 9,009 to 85,755, increasing the spread by 924 positions. The weekly closing price declined to 1.2165 from 1.2179.

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 1.2120 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.