No market entry signals were formed yesterday. Let's examine the 5-minute chart and delve into what happened there. In my morning review, I mentioned the level of 1.2621 as a possible entry point. We saw a breakthrough of 1.2621, but there was no downward retest, and considering Friday's bear market, it was quite dangerous to buy the pound on such a signal. In the afternoon, I did not see any suitable entry points into the market.
COT report:
Before delving into the technical picture of the pound, let's take a look at what happened in the futures market. The COT report (Commitment of Traders) for August 29 logs a decrease in long positions and an increase in short ones. The strong US labor market and Federal Reserve Chairman Jerome Powell's speech were the main reasons behind the sharp increase in short positions. Considering the fact that UK data have recently been quite discouraging, indicating a brewing recession, pressure on the pound is likely to persist in the coming autumn. However, the buyers quickly took advantage of this. Indeed, the lower the pound, the more attractive it is for buying and holding in the medium term. The difference in the policies of central banks will continue to have a positive effect on GBP/USD. The latest COT report says that long non-commercial positions fell by 918 to 97,143, while short non-commercial positions increased by 9,788 to 48,742. As a result, the spread between long and short positions jumped by 124. The weekly price dropped to 1.2624 from 1.2741.
For long positions on GBP/USD:
Today, market players will focus on the UK Services PMI, which is a crucial component of the economy. If the index is revised lower, and bear in mind that it's already below the 50-point mark indicating a contraction in activity, this could lead to a new pound sell-off and a return to monthly lows. For this reason, I prefer to act on a decline and a false breakout around the new support at 1.2606, which is in line with the bullish moving averages. This will serve as a buy signal, with the goal of rising to the resistance at 1.2636, which the pair couldn't breach yesterday. A breakout and downward test of this range amid strong PMIs will create another buy signal and bolster the buyers' confidence, maintaining prospects towards a new high at 1.2670. If the pair rises above this range, we can talk about a surge to 1.2709 where I intend to take profit. If the pair drops to 1.2606 without significant buying activity, the pressure on the pound will intensify, raising the possibility of a broader decline. In that case, I will postpone buying the pair until it hits 1.2577. I plan to buy GBP/USD right after a rebound from 1.2549, keeping in mind an intraday correction of 30-35 pips.
For short positions on GBP/USD:
Yesterday, the bears did everything they could and managed to maintain control of the market. Of course, it would be good to see a surge to 1.2636 during the European session. A false breakout after good PMI readings will signal a selling opportunity with the prospect of a decline and a test of support at 1.2606, formed at the end of yesterday. A breakout and a subsequent upward retest of this range will give the bears an advantage, paving the way for a decline to 1.2577. The ultimate target remains the 1.2549 level where I will be taking profit. If GBP/USD rallies and there is no significant action at 1.2636, buyers might re-enter the market, which can revive the bullish correction. In this case, I will postpone selling the pair until a false breakout in the area of the next resistance at 1.2670. If the price does not decline at this point, I will sell the pound directly on a bounce from 1.2709, considering a downward correction of 30-35 pips.
Indicator signals:
Moving Averages
Trading is taking place around the 30 and 50 moving averages, indicating a slight market balance.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If GBP/USD grows, the indicator's upper band around 1.2640 will serve as resistance. If the pair falls, the indicator's lower band around 1.2575 will serve as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators 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 number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.
