FX.co ★ GBP/USD: trading plan for the US session on November 7th (analysis of morning deals). The pound continues to slide down

In my morning forecast, I highlighted the level of 1.22990 and recommended using it as a basis for market entry decisions. Let's take a look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout at this level provided an excellent entry point for buying the pound. However, at the time of writing this article, the upward movement amounted to only about 10 points, so the focus is on the American session. The technical picture has not been revised for the second half of the day.

To open long positions on GBP/USD:

As long as trading remains above 1.2299, the chances of further GBP/USD growth are quite high. A decline and another false breakout in this range, along with dovish statements from FOMC representatives, will provide an entry point for long positions with the aim of returning to the resistance at 1.2334, which we didn't reach in the first half of the day. Breaking and consolidating above this range will make buyers feel more confident in the market, signaling an opening for long positions with a target of 1.2366, where moving averages, playing on the bearish side, are located. The ultimate target is the area at 1.2394, where I will make a profit. In the scenario of a pair's decline and a lack of activity at 1.2299 in the second half of the day – this level has already been tested during the European session – only a false breakout in the area of the next support at 1.2263 will signal the opening of long positions. I plan to buy GBP/USD on a rebound only from 1.2223, with a target of a 30-35 point intraday correction.

To open short positions on GBP/USD:

Sellers continue the correction, which is about to turn into a new short-term bearish market. So, for buyers who are still in the market, it's time to think about regaining the initiative. I will prefer to act in the case of an upward move from the resistance at 1.2334. Only a false breakout will provide a chance for further correction and a signal to open short positions with the expectation of a move toward the support at 1.2299. Breaking and retesting this range from below will deal a more serious blow to buyer positions, leading to the removal of stop orders and opening the path to 1.2263. The more distant target is the area at 1.2223, where I will take a profit. A test of this level will nullify all the bullish plans for further pound growth. In the case of an upward move in GBP/USD and a lack of activity at 1.2334 in the second half of the day, demand for the pound will strengthen, and buyers will have a chance to establish a further upward trend. In such a scenario, I will postpone selling GBP/USD until a false breakout at 1.2366. If there is no downward movement even there, I will sell GBP/USD right on the rebound from 1.2394, but only in anticipation of a pair's correction downward by 30-35 pips within the day.

In the COT (Commitment of Traders) report for October 31, there was a reduction in long and short positions, but this did not significantly alter the balance of power, as the data does not account for the latest important report on the U.S. labor market. The market almost didn't react to the fact that the U.S. Federal Reserve left its policy unchanged, but the reaction to weak job growth figures led to active growth of GBP/USD at the end of last week, which may impact the future medium-term trend of the pair. The more there is talk that interest rates in the U.S. may remain unchanged in December of this year due to early signs of economic weakness, the greater the pressure on the U.S. dollar and the more expensive the pound becomes. In the latest COT report, it is mentioned that long non-commercial positions decreased by 3,407 to 63,712, while short non-commercial positions dropped by 1,672 to 84,083. As a result, the spread between long and short positions increased by 210. The weekly price decreased to 1.2154 from 1.2165 the previous week.

Indicator Signals:

Moving Averages:

Trading is conducted below the 30 and 50-day moving averages, indicating the potential for further pound decline.

Note: On the hourly chart H1, the author sets the period and prices for moving averages, which are different from the standard definition of traditional daily moving averages on the daily chart D1.

Bollinger Bands:

In the case of a decline, the lower boundary of the indicator around 1.2299 will act as support.

Indicator Descriptions:

• Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence - converging/diverging moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands. Period 20.
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific requirements.
• Long non-commercial positions represent the total long open positions of non-commercial traders.
• Short non-commercial positions represent the total short open positions of non-commercial traders.
• The total non-commercial net position is the difference between short and long non-commercial positions.