In my morning article, I focused on several support and resistance levels, which the GBP/USD pair failed to reach. Let's observe the 5-minute chart and analyze it. Despite the Governor of the Bank of England's speech, the British pound kept the balance and continued trading in the sideways channel amid low volatility in the morning. This was the reason for revising the technical picture in the afternoon.
To open long positions on GBP/USD, you need:
The main objective of buyers now is to regain control of the new resistance 1.1883, formed during the European session. However, it will be difficult to achieve as there are no important US statistics. Moreover, the Redbook Retail Sales Index and the Richmond Fed Manufacturing Index are unlikely to be the triggers for the pound to move sharply in a certain direction. The speeches of the Federal Reserve members will arouse great interest. They may continue to pursue a softer monetary policy, which will provide support to the pound in the afternoon. Currently, the best option for opening long positions will be the support at 1.1822 with moving averages favoring the bulls. Only a false breakout there will provide a chance to enter long positions, counting on resuming market balance and exit above the resistance at 1.1883. A breakout and the top-down test of this range will form a buy signal with the goal to surge to 1.1947. The most distant target will be the high of 1.2021, where I recommend locking in profits. If the bulls fail to achieve their targets in the second half of the day and do not reach 1.1822, there will be larger profit taking. However, it will not do much harm to the sideways channel in which the pair is trading now. In this case, I would recommend buying the GBP/USD pair only around the support at 1.1765, which is the lower boundary of the channel. It is advisable to open long positions on GBP/USD immediately on a rebound from 1.1714, or even lower around 1.1650 with a target of 30-35 pips intraday correction.
To open short positions on GBP/USD, you need:
Buyers' main focus is to defend the level of 1.1883. A failed break at this level will be considered a positive sign in the beginning of the American session. It will give a sell signal with a good prospect for the pair to move to the area of 1.1822. I believe buyers will become more active at this level formed at the end of the European session. A breakout and the down-top test of 1.1822 as well as strong US data, indicating stable US economy, will give an entry point to expect a return to 1.1765, where bears will also face certain difficulties. The most distant target is 1.1714, where I recommend locking in profits. If a downward movement from 1.1883 is not registered in the afternoon after the false breakout, the bulls may resume buying. This will lead to a new surge of the pound and push it to the area of 1.1947. A false breakout there will provide a chance to enter short positions with the target of a downward movement. If there is no activity there, I recommend selling the GBP/USD pair immediately on the rebound from 1.2021, counting on its movement of 30-35 pips within a day.
The COT report for November 15 recorded a decline in both short and long positions. Soaring inflation in the UK was quite unexpected. This fact definitely affected the Bank of England and its future plans regarding interest rates. According to the situation, the regulator will have to further pursue its extremely aggressive policy. This will keep the demand for the pound and allow it to strengthen against the US dollar. However, the current problems in the UK economy, confirmed by the latest GDP data, will unlikely attract large players to the market, who believe that the long-term cycle of the pound's recovery has started. Remember that the Federal Reserve also continues to follow its policy of high interest rates to fight inflation. Therefore, it is useless expecting the GBP/USD pair to rise in the medium term. The latest COT report showed that long non-commercial positions dropped by 1,931 to 34,699, while short non-commercial positions fell by 8,832 to 67,533, further lowering the negative non-commercial net position to -32,834 from -39,735 a week earlier. The weekly closing price rose to 1.1885 versus 1.1549.
Indicator signals:
Moving averages.
Trading is conducted below the 30 and 50 day moving averages, indicating that buyers are trying to return to the market.
Note. The period and prices of moving averages are considered by the author on hourly chart H1 and differ from the common definition of classic daily moving averages on daily chart D1.
Bollinger Bands.
In case the pair rises, the upper boundary of the indicator near 1.1883 will act as resistance.
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 (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-commercial traders are speculators, such as individual traders, hedge funds and large institutions, which 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.
