Yesterday, only one market entry signal was formed. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2304 as a possible entry point. A rise and false breakout at this mark produced a sell signal, which sent the pound down by more than 30 pips. During the US session, the pound rallied and we were unable to achieve a convenient entry point.
For long positions on GBP/USD:
GBP/USD experienced a significant rally driven by the latest US inflation data. Today, the focus will shift to similar indicators, but this time it's for the UK. A slowdown in consumer price inflation may lead to a correction, as cooling inflation will allow the Bank of England to forgo any more interest rate hikes. In case the pair falls, a false breakout at 1.2459 will provide an entry point for long positions to sustain the bullish scenario observed the day before. The target will be yesterday's high of 1.2502. Only a breakout and consolidation above this range will produce a buy signal, potentially targeting the 1.2543 area. The ultimate target is found at 1.2881 where I will be taking profits. Should the pair decline and buyers show no initiative at 1.2459, the pressure on the pair will increase, but we shouldn't expect a pound sell-off. A false breakout near the next support level at 1.2425 will signal the opportunity to open long positions. I plan to buy GBP/USD immediately on a rebound from 1.2394, aiming for a correction of 30-35 pips within the day.
For short positions on GBP/USD:
The bears only have one chance to recover today, and this will depend on the UK inflation data. In case the pair rises after the report, only a false breakout near the monthly high of 1.2502 will generate a sell signal with a movement towards the support level at 1.2459. Breaching this level and subsequently retesting it from below will deal a more serious blow to the bulls' positions, lead to a cascade of stop orders, and open a path to 1.2425. The more distant target will be 1.2394, where I'd be taking profits. If GBP/USD grows and there are no bears at 1.2502, the bulls will get a chance to further build the uptrend. I will postpone selling until a false breakout at 1.2543. If downward movement stalls there, one can sell the British pound on a bounce from 1.2581, bearing in mind a 30-35-pips downward intraday correction.
COT report:
The Commitments of Traders (COT) report for November 7 showed a decrease in both long and short positions, but this did not significantly alter the market dynamics. Persistent pressure on the pound was observed throughout the week as the latest report on the UK's economic growth rate was disappointing, hinting at the real chances of a recession in Q4 this year. Considering the Bank of England's statements on maintaining high interest rates for an extended period, the chances of a substantial rise in the British pound remain slim. The only factor that could change this dynamic is weak US data indicating a further reduction in price pressures. The more the talks about unchanged US rates in December, the more pressure there will be on the US dollar, making the pound more valuable. The latest COT report states that non-commercial long positions decreased by 6,180 to 57,532, while non-commercial short positions fell by 10,299 to 73,784. Consequently, the spread between long and short positions increased by 310. The weekly closing price rose to 1.2298 from 1.2154.
Indicator signals:
Moving Averages
The instrument is trading above the 30 and 50-day moving averages. It indicates that GBP/USD is likely to rise further.
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 declines, the indicator's lower border near 1.2366 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.
