In the morning article, I turned your attention to 1.2078 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. There was no buy signal at 1.2078 because of the decline and the unsuccessful attempt of bulls to return to the market in the morning. For this reason, I decided to refrain from opening long positions. For the afternoon, the technical outlook has changed. However, trading volumes in the American session are likely to be as low as in the European one.
When to open long positions on GBP/USD:
Bulls are likely to push the GBP/USD pair to 1.2134 as trading floors in the US are closed on the occasion of Thanksgiving Day. However, a further rise is questionable. Therefore, I am unwilling to open long positions at highs and prefer to do so on declines. Only a false breakout of the support level of 1.2066 will provide a good buying opportunity. If so, the pair could reach a monthly high of 1.2134. A breakout and a downward retest test of this level will give a buy signal with the possibility of a jump to 1.2179. A more distant target will be the 1.2224 level where I recommend locking in profits. If the bulls fail to push the pair to 1.2066 in the afternoon, traders will rush to close Stop Loss orders. The bulls are sure to lose ground in this case. Another test of this level and a low trading volume makes this scenario very likely. If so, it is better to open long positions at the support level of 1.2021 where the moving averages are passing in the positive territory. You could buy GBP/USD immediately at a bounce from 1.1964 or 1.1902, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
Sellers made unsuccessful attempts to enter the market at the start of the European session. The main task of bears for the American session is to protect the nearest resistance level of 1.2134. A false breakout of this level will give a sell signal with the prospect of a drop to 1.2066. A breakout and an upward retest of 1.2066 will undermine the bullish trend. It will definitely exert pressure on the pair at the end of the week, providing a selling opportunity. The pair is expected to decrease to 1.2021 where the bears will face strong resistance levels. A more distant target will be the 1.1964 level where I recommend locking in profits. If there is no downward movement from the level of 1.2134, the bulls will regain the upper hand. Thus, the pair is likely to jump to 1.2179. Only a false breakout there will generate a sell signal. If bears show no energy at this level, you could sell GBP/USD immediately at a bounce from 1.2224, keeping in mind a downward intraday correction of 30-35 pips.
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.
Indicators' signals:
Trading is carried out above the 30 and 50 daily moving averages, indicating a further rise in the pound sterling.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If GBP/USD declines, the indicator's lower border at 1.2021 will serve as support.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 who 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 the short and long positions of non-commercial traders.
