Yesterday, the pair formed just one entry signal. Let's see what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2110 as a possible entry point. The pair fell to 1.2110, but it was literally about 5 pips short of a false breakout, so I missed the entry point for long positions. In the afternoon, a false breakout at 1.2117 produced a great buy signal, pushing the price up by more than 50 pips.
For long positions on GBP/USD:
Today, only the UK Halifax house price index will be published, which is unlikely to have much impact on the pair, so buyers still have the chance to extend the upward correction before the release of the US labor market data. Of course, it would be more interesting to enter the market on dips while expecting the pair to correct higher. Under current conditions, it's best to act around the new support at 1.2154, formed at the end of yesterday. This is also in line with the bullish moving averages. A false breakout at 1.2154 will serve as an entry point for long positions allowing the price to reach the nearest resistance at 1.2186, which was formed today. A breakout and stabilization above this range, on the back of good UK data, might pave the way for a bullish correction, bolstering buyers' confidence. This would signal the opening of long positions targeting 1.2216. The ultimate target would be the 1.2268 area where I'd be looking to take profits. If the pair declines to 1.2154 without buyer activity, bearish pressure on the pound will likely return, opening the path to a low of 1.2108. A false breakout here would signal long entries. I plan to instantly buy GBP/USD on a bounce from the 1.2058 low, aiming for a daily intraday correction of 30-35 pips.
For short positions on GBP/USD:
The bears should guard the nearest resistance at 1.2186. However, I believe that this level is more of an intermediate level and I marked it for a reason: I expect low volatility in the first half of the day and 1.2186 is the nearest place where sellers can come back to the market. An ideal scenario would be a false breakout at this level, along with a weak UK report, generating a sell signal with a movement towards the support level at 1.2154 that was formed yesterday. Breaching this level and subsequently retesting it from below would strike a significant blow to the bulls, providing a window to target support at 1.2108, from where the pair has already recovered this week. The more distant target will be 1.2058, where I'd be taking profits. If GBP/USD grows and there are no bears at 1.2186, the demand for the pound will return, which will give the bulls a chance to extend the upward correction. In this case, I'd postpone short positions until a false breakout at 1.2216 occurs. If there is no downward movement there, I'd sell the pound on an immediate rebound from 1.2268, aiming for a downward correction of 30-35 pips.
COT report:
The COT (Commitment of Traders) report for September 26 logged a decrease in long positions and a very large increase in short positions. It means there are fewer and fewer buyers of the pound sterling, especially after downbeat UK GDP data. The UK economic growth is expected to slow down significantly in the 3rd quarter. No wonder, the British pound is actively falling against the US dollar. The latest COT report said long non-commercial positions fell by 345 to 84,750, while short non-commercial positions increased by 17,669 to 69,081. As a result, the spread between long and short positions narrowed by 702. The weekly price dipped and stood at 1.2162 against 1.2390.
Indicator signals:
Moving Averages
Trading above the 30- and 50-day moving averages indicates that buyers are trying to extend the upward correction.
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 the pair declines, the lower band of the indicator near 1.2145 will act 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.
