Yesterday, the pair formed several entry signals. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2664 as a possible entry point. A decline and false breakout at this mark produced a buy signal, but the pair did not actively rise, and afterwards the pound continued to fall, forcing us to take losses. In the afternoon, a failed consolidation above 1.2664 generated a great sell signal with the pair falling by 50 pips. Safeguarding 1.2609 and the buy signal made it possible to take more than 40 pips of profit.
For long positions on GBP/USD:
Volatility spiked in response to the US data, but buyers did their best to keep the pair below 1.2609, maintaining the chances of an upward correction at the end of the week. The Bank of England is now perhaps the only one still talking about the need to continue tight monetary policy, which leaves the pound at current highs. The UK Manufacturing PMI data for November will be released today, and it could turn out to be disappointing. If that's the case, this may exert pressure on the pair. For this reason, I plan to act after a decline and a false breakout near 1.2609, similar to what I discussed above. This will provide an entry point for long positions aimed at supporting the pound and testing the resistance at 1.2664, which is in line with the bearish moving averages. A breakout and consolidation above this range will open the way to the monthly high of 1.2722. The furthest target will be the 1.2761 area, where I plan to take profits. If the pair falls and there is no buying activity at 1.2609, the buyers will do badly. In this case, only a false breakout near the next support at 1.2563 will signal opening long positions. I plan to buy GBP/USD immediately on a rebound from 1.2526, aiming for an intraday correction of 30-35 pips.
For short positions on GBP/USD:
Sellers are actively trying to continue the corrective movement, but so far the results haven't been noteworthy. At each dip, the pound is actively bought back, which indicates the presence of big players in the market. I intend to act after defending the resistance at 1.2664, where a breakout can take place in case of good PMI data. Forming a false breakout at that mark will give bears a chance to move the price down to the support at 1.2609, where I expect the bulls to be active. Therefore, only a breakout and a retest from below will deal a more serious blow to the buyers' positions, leading to the removal of stop orders and opening the way to 1.2563. The further target will be the 1.2503 area, where I will take profits. If GBP/USD rises and there is no activity at 1.2664 in the first half of the day, the uptrend will continue. In such a case, I will hold back from selling until the price performs a false breakout at 1.2722. If there is no downward movement there, I will sell GBP/USD immediately on a rebound from 1.2761, considering a downward correction of 30-35 pips within the day.
COT report:
The Commitments of Traders (COT) report for November 21 showed a decrease in both long and short positions. The pound was in demand throughout last week, as the statements of the Bank of England officials that the central bank, if not to continue raising interest rates, at least will keep them at the current highs for quite a long period of time, had boosted the pair's growth. The minutes of the Federal Reserve's November meeting, which were hawkish in nature, had no effect on market sentiment. This week, several Federal Reserve officials are scheduled to speak, which may help the dollar to compensate for the recent losses, but we need to hear the same promises from US central bank officials. The latest COT report indicates that non-commercial long positions decreased by 9,497 to 43,300, while non-commercial short positions were down by 11,129 to 69,398. As a result, the spread between long and short positions increased by 2107. The weekly closing price rose to 1.2543, up from the previous value of 1.2503.
Indicator signals:
Moving Averages
Trading below the 30- and 50-day moving averages indicates a possible decline in the pair.
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 1.2609 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.
