FX.co ★ GBP/USD: Trading Plan for the U.S. Session on October 29th (Morning Trades Analysis)

In my morning forecast, I highlighted the 1.2974 level as a key entry point. Let's review the 5-minute chart to analyze what occurred. The breakout and retest of 1.2974 provided a strong entry point for buying the pound, resulting in a 20-point rise at the time of writing this new forecast. The technical picture has been slightly revised for the second half of the day.

To Open Long Position for GBP/USD:

As observed yesterday, pound buyers managed another rally, aiming to test the weekly high and sustain an upward correction. Weak data on the U.S. trade balance and consumer confidence indicator could support this trend. If strong U.S. data pressures the pound lower, it could create a buying opportunity. Should the pair decline, a false breakout around 1.2958 would confirm a valid entry for long positions, targeting 1.2994, which was just missed in the first half of the day. A breakout and retest of 1.2994 will signal a new long entry with a target at the next resistance of 1.3023. The ultimate target is 1.3053, where I plan to lock in profits. If GBP/USD declines without significant bullish activity around 1.2958 in the afternoon, a bearish market will likely return, leading to a move toward the next support at 1.2941. A false breakout there would provide a suitable setup for long entries. Additionally, I plan to buy GBP/USD on a rebound from the 1.2924 low, aiming for a 30-35 point intraday correction.

To Open Short Position for GBP/USD:

Sellers showed limited resistance at 1.2974, raising questions about their ability to maintain market control. It's now crucial to hold the nearest resistance at 1.2994, which may soon be tested. A false breakout there would present a viable selling opportunity, targeting support at 1.2958 and keeping the pair within a sideways channel. A breakout and retest from below of this range could disrupt buyers' positions, leading to stop-loss activations and opening the way to 1.2941. The ultimate target is the 1.2924 level, where I'll lock in profits. Testing this level could reinforce the bearish trend. If GBP/USD rises in the second half and sellers show limited activity at 1.2994 amidst weak U.S. statistics (a likely scenario), buyers may continue their recovery efforts. Bears would then have to retreat toward the resistance at 1.3023, where I'll only sell on a false breakout. If no downward movement occurs there, I'll look for short entries on a rebound from 1.3053, targeting a 30-35 point intraday decline.

In the October 22 COT (Commitment of Traders) report, both long and short positions were reduced, although this did not significantly impact market dynamics, as buyers still outnumber sellers by about two and a half times. This week, there is no major data from the UK, and with British policymakers having said all they could, I expect further recovery of the pound against the dollar. However, much depends on U.S. GDP and labor market data, which should not be overlooked. The latest COT report showed a decrease in long non-commercial positions by 11,320, to 140,603, while short non-commercial positions dropped by only 94, to 66,072. As a result, the gap between long and short positions widened by 1,181 positions.

Indicator Signals:

Moving Averages:

Current price action is above the 30- and 50-day moving averages, indicating attempts by the pound to rise.

Note: The period and prices of moving averages are analyzed by the author on the hourly H1 chart and differ from the standard daily moving averages on the D1 chart.

Bollinger Bands:

If the price declines, support is likely around the lower Bollinger Band near 1.2958.

Indicator Descriptions:

• 30-period Moving Average: Identifies the current trend by smoothing out volatility and noise, marked in green on the chart.
• 50-period Moving Average: Identifies the current trend by smoothing out volatility and noise, marked in yellow on the chart.
• MACD (Moving Average Convergence/Divergence): Fast EMA – 12 periods, Slow EMA – 26 periods, SMA – 9 periods.
• Bollinger Bands: 20 periods.
• Non-commercial traders: Speculators, including individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting specific criteria.
• 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: The difference between short and long positions of non-commercial traders.