Long positions on GBP/USD:
The volatility on the pound is not high, but several signals to enter the market were formed in the first half of the day. Let's take a look at the 5-minute chart and understand what happened. In my forecast this morning, I was talking about the level of 1.3428, and recommended buying the pound in case a false breakout is formed, which actually happened. Bears took several unsuccessful attempts to break through this level, which led to an entry point for long positions. At the time of writing, the pound has already gained 20 pips with an intraday volatility of 30. The technical picture in the second half of the day has changed, so we may suggest new scenarios.
There is no important fundamental data in the second half of the day. Bulls' main target is to break through and fix above resistance at 1.3456, where the moving averages are located, which are on the side of the sellers. A test of this level top/bottom may be an entry point for long positions, aiming to return to 1.3494, where traders may take profit. The price is unlikely to break above this range, but an additional signal to buy the pound will be formed only with the breakout of 1.3494 with the prospect of growth to 1.3560, where I recommend to take profit. If the pair declines in the second half of the day, the best entry point for long positions is the formation of a false breakout around 1.3420, which occurred in the first half of the day. If bulls are not active at this level, the pressure on the pound might get stronger. In this case I recommend to open new long positions only after the pair performs a false breakout around 1.3380. Buying GBP/USD on the rebound can be done from the last week's low at 1.3354, allowing an intraday correction by 25-30 pips.
Short positions on GBP/USD:
Bears tried to put pressure on support this morning, but it did not lead to anything good. Now their target is to hold the price below resistance at 1.3456. Only the formation of a false breakout at this level may lead to a good entry point for short positions with the subsequent decrease of the pair to the area of intermediate support at 1.3420. If the price breaks through the support, the pair is likely to be dragged to the weekly low at 1.3380, where traders may generate profit. A break through this range will be no less important for the sellers. If the price tests 1.3380 bottom/top it may become an additional signal for opening short positions with the aim to decline to the lows of 1.3354 and 1.3308, where I recommend taking profit. In case the pair rises during the New York trading session and there are no sellers at 1.3456, it is better to postpone the selling until the pair touches resistance at 1.3494. I recommend opening short positions on a rebound from 1.3560, or even higher from a new high at 1.3605, allowing a downward rebound by 20-25 pips.
The COT (Commitment of Traders) reports for November 9 showed an increase in short positions, and a sharp decline in long positions, which led to a negative delta. Weak data on GDP growth in the UK in Q3 this year, as well as the risk of a more serious slowdown in retail sales in Q4 due to high inflation triggered a drop in the pound and kept the pressure on it. The aggravation of the situation around the protocol on Northern Ireland, which the UK authorities plan to suspend in the near future, to which the European Union is preparing to introduce certain retaliatory measures, has become an important issue as it does not add confidence to the buyers of the pound. At the same time, the US inflation has been increasing. There were talks about the need to raise the rates earlier next year, which gives considerable support to the US dollar. However, I recommend buying the pair during considerably large declines, which may occur amid the uncertainty in the central bank policy. The COT report indicated that long non-commercials declined to 54,004 from 57,255, while short non-commercials strengthened to 66,097 from 42,208. This resulted in a negative change in the nonprofit net position. The delta was -12,093 versus 15,047 a week earlier. The weekly closing price of GBP/USD dropped significantly as a result of the Bank of England policy implementation to 1.3563 from 1.3654.
Trading is carried out below the 30 and 50 moving averages, which indicates that the bears have taken control over the market.
Note: The period and prices of moving averages are considered by the author on the hourly chart and differs from the general definition of the classic daily moving averages on the daily chart.
A breakthrough of the lower boundary in the 1.3420 area will strengthen the pressure on the pair. A break of the upper boundary in the 1.3456 will lead to increase in the pair.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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.