To open long positions on GBP/USD, you need:
Today in the first half of the day, we observed attempts by buyers to continue the growth of the pair, which was observed today during the Asian session. However, they failed, never getting above 1.3634, forming several signals to enter the market. Let's look at the 5-minute chart and figure out the entry points that were formed. During the European session, it is seen how two attempts to break above 1.3634 led to the formation of false breakouts and a signal to open short positions, which is valid at the time of writing the review. The downward movement has already amounted to about 20 points. From a technical point of view, nothing has changed.
The main focus will be placed on the data on the consumer price index in the United States, which will determine the pair's further direction if only the indicators go beyond the expectations of economists. A weak report will allow the bulls to return to the level of 1.3634, and a reverse test of this range from top to bottom will form a buy signal for GBP/USD, which will push the pair to the area of 1.3670. A similar breakdown of this area will form a new entry point into the purchase of the pound, which will lead to a larger upward movement to 1.3714, where I recommend taking the profits. A more distant target will be the 1.3748 area. If the bulls again cannot offer anything above the middle of the 1.3634 side channel and the pressure on GBP/USD returns after the US inflation data, I advise you not to rush into purchases. An important task will be to protect the support of 1.3593. Only the formation of a false breakdown there will form a good entry point into long positions. Otherwise, the optimal scenario for buying will be a test of the next 1.3546 area. However, it is best to wait for the formation of a false breakdown. I advise you to look at long positions of GBP/USD immediately for a rebound only from the minimum of 1.3491, based on an upward correction of 25-30 points within a day.
To open short positions on GBP/USD, you need:
Although the bears are actively defending themselves, they still cannot take the market under their control. As noted above, the sellers' entire focus in the afternoon will remain on protecting the 1.3634 level - which they successfully coped with during the European session. If we see an unsuccessful attempt to consolidate above this range in the afternoon after the data on the US consumer price index, as well as another form of a false breakdown, I advise you to open short positions on the pound in the expectation of continuing the downward correction of the pair. The sellers' next task will be to regain control over the support level of 1.3593, above which the moving averages are playing on the buyers' side. A breakthrough of this area and its reverse test from the bottom up will form a signal to open short positions to reduce the pair to 1.3546 and update the minimum in the area of 1.3491, where I recommend fixing the profits. In case of further recovery of the pound and the absence of those willing to sell at 1.3634, only the formation of a false breakdown in the area of the next resistance of 1.3670 will be a signal to open short positions in GBP/USD. I advise selling the pound immediately for a rebound from a larger resistance of 1.3714, or even higher - from a maximum of 1.3748, counting the pair's rebound down by 20-25 points inside the day.
The COT reports (Commitment of Traders) for October 5 recorded a sharp increase in short positions and a reduction in long positions, which led to a move to the negative zone of the total net position. Despite a fairly active recovery of the pair a week earlier, it was not possible to continue the bullish trend for the pound. However, there were all the prerequisites for this. As the data showed, problems in the supply chains in the UK remain at a fairly high level, which causes prices to creep up. It is unlikely that such a development of the situation will force the Bank of England to stand aside for a long time and watch the inflationary spiral unfold. The minutes of the meeting of the British regulator, which was published a week earlier, indicated that changes in monetary policy could be adopted as early as November this year. Therefore, the only problem that stands in the way of buyers of the pound is the US Federal Reserve System, which is also heading for tightening monetary policy. Despite all this, I advise buying the pound with its significant corrections, as the growth of the trading instrument is expected in the medium term. The COT report indicates that long non-commercial positions decreased from the level of 57,923 to 48,137.
In contrast, short non-commercial positions jumped from the level of 55,959 to the level of 68,155, which led to a partial increase in the advantage of sellers over buyers. As a result, the non-commercial net position returned to the negative zone and dropped from the 1964 level to the -20018 level. The closing price of GBP/USD dropped 1.3606 against 1.3700 at the end of the week.
Signals of indicators:
Trading is conducted above 30 and 50 daily moving averages, which indicates an attempt by the bulls to turn the market to their side.
Note: The author considers the period and prices of moving averages on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
A breakthrough of the upper limit of the indicator in the area of 1.3630 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.3570 will increase the pressure on the pair.
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 specific 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.