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FX.co ★ GBP/USD: trading plan for European session on November 24. COT report. GBP to reach new monthly highs

GBP/USD: trading plan for European session on November 24. COT report. GBP to reach new monthly highs

Yesterday, traders received many good signals to enter the market, which allowed them to earn a lot. Let us take a look at the 5-minute chart to figure out what happened. Earlier, I asked you to pay attention to the level of 1.1902 to decide when to enter the market. A rise and a failure to consolidate above 1.1902 led to a sell signal and the pound's drop by more than 30 pips. However, quite positive PMI data limited the downward potential. Some time later, bulls pushed the price above 1.1902, whereas a reverse test of this area gave a buy signal. As a result, the pound sterling increased to 1.1964. A similar breakout and a test of 1.1964 amid weak data from the US gave an additional long signal with the target at 1.2021. There, bears tried to stop the bullish movement. That is why a false breakout led to a sell signal. The pair dropped by more than 20 pips and then resumed rising. The most profitable sell order was opened after a rebound from 1.2078. The pair returned to 1.2021.

GBP/USD: trading plan for European session on November 24. COT report. GBP to reach new monthly highs

Conditions for opening long positions on GBP/USD:

The fact that the BoE may catch up with the US Fed in terms of the key interest rate may boost the pound sterling, allowing it to recoup its previous losses. Today, the UK is going to publish its data on the CBI industrial trends orders. What is more, MPC Member Ramsden and BoE MPC Member Pill will deliver speeches. It is obvious that buyers are expecting a further rise. Thus, in the first part of the day, the pair may hit new monthly highs. In case of a negative reaction to the data and the pair's decline, the first strong support level will be located at 1.2078. A false breakout of this level will give a buy signal with the target above the resistance level of 1.2134. A breakout of this area will be of primary importance for bulls today. However, even without this level, the pair has significantly risen already. A breakout and downward test of 1.2134 amid hawkish comments provided by BoE's representatives may intensify the bullish trend. This will allow the pound sterling to climb to 1.2179. If the price exceeds the level, it may jump to 1.2224. The farthest target is located at 1.2256, where it is recommended to lock in profits. If bulls fail to protect 1.2078, which may happen in the first part of the day, pressure on the pair will increase, but nothing special will happen. In this case, traders should be cautious. It will be better to buy after a decline and a false breakout of 1.2021. Traders may also go long just after a bounce off 1.1964 or even lower – from 1.1902, expecting a rise of 30-35 pips within the day.

Conditions for opening short positions on GBP/USD:

Sellers are not very active due to yesterday's reports from the US. Today, the bullish cycle may continue. However, bears may receive support from Thanksgiving Day, which will cap the upward potential of the pair because of the low trading volume. A false breakout of 1.2134 and weak data from the UK will give a perfect sell signal with a target at 1.2078. Bears should gain control over this level. Otherwise, the pair is unlikely to fall deeper. A breakout and an upward test of 1.2078 will give a sell signal with the target at 1.2021. This may affect the bullish sentiment. The farthest target is located at 1.1964, where it is recommended to lock in profits. Even a test of this area is unlikely to stop the bullish trend. If the pound/dollar pair increases and bears fail to protect 1.2134, the situation will become hardly predictable. In the event of this, the pair may hit such levels as 1.2179 and 1.2224. Only a false breakout of these levels will give a short signal. If bears fail to be active there, traders may sell the asset just from the high of 1.2256, expecting a decline of 30-35 pips within the day.

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GBP/USD: trading plan for European session on November 24. COT report. GBP to reach new monthly highs

COT report

Commitments of Traders for November 15th logged a decline in both long and short positions. An unexpected surge in inflation in the UK is sure to impact the BoE's monetary policy stance. Given the persistently high inflation, the regulator has no choice but to stick to monetary tightening. If so, it will spur demand for the pound sterling. It will be able to climb higher versus the greenback. However, given the headwinds the UK economy is now facing, it will not be enough to attract investors to the market who firmly believe that the pound sterling has entered a long-term recovery cycle. Besides, the Fed remains strongly committed to aggressive tightening to cap galloping inflation. Hence, GBP/USD may be unable to start a rally in the medium term. According to the latest COT report, the number of long non-commercial positions dropped by 1,931 to 34,699 and the number of short non-commercial positions sank by 8,832 to 67,533, which led to a further increase in the negative non-commercial net position to -32,834 from -39,735 a week earlier. The weekly closing price of GBP/USD grew to 1.1885 against 1.1549.

GBP/USD: trading plan for European session on November 24. COT report. GBP to reach new monthly highs

Signals of indicators:

Moving Averages

Trading is performed above 30- and 50-day moving averages, which points to a further rise in the pound sterling.

Note: The period and prices of moving averages are considered by the author on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

If the British pound rises, the upper limit of the indicator located at 1.2140 will act as resistance.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
  • MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
  • Bollinger Bands. The period is 20.
  • Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long non-commercial positions are the total number of long positions opened by non-commercial traders.
  • Short non-commercial positions are the total number of short positions opened by non-commercial traders.
  • The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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