Yesterday, the pair formed some great entry signals. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2658 as a possible entry point. The pair fell into this range, but due to low market volatility it was not possible to form a false breakout on this mark. In the afternoon, the 1.2580 level was repeatedly tested, and each time, a false breakout produced a buy signal. On average, the upward movement was about 25 pips, afterwards the pair was under pressure again.
For long positions on GBP/USD:
The pound continues to lose ground following the euro, as many traders fear that the UK economy has exactly the same prospects as the eurozone economy. Bank of England Governor Andrew Bailey's remarks on Wednesday did not leave an impression, but the talk that the British central bank may follow the path of the European Central Bank and reduce rates much earlier in 2024 started to gain popularity. Today, except for the UK house price index, there are no scheduled economic reports, so the pound will probably continue to fall. For this reason, I plan to act after a decline and a false breakout near the nearest support at 1.2539. This will provide an entry point for long positions aimed at supporting the pound and testing the 1.2575 area. Above this level, we have the bearish moving averages. A breakout and consolidation above this range will bring back demand for the pound and open the way to 1.2610. The furthest target will be the 1.2646 area, where I plan to take profits. If the pair falls and there is no buying activity at 1.2539, the pair will continue to trade within the new descending channel. In this case, only a false breakout near the next support at 1.2503 will signal opening long positions. I plan to buy GBP/USD immediately on a rebound from 1.2478, aiming for an intraday correction of 30-35 pips.
For short positions on GBP/USD:
Sellers have a good chance of supporting the downtrend. I intend to act after defending and forming a false breakout near the resistance at 1.2575, established yesterday. This will give the bears a chance to move the price down to the support at 1.2539. 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 1.2503. The ultimate target here is the 1.2478 area, where I will take profits. If GBP/USD rises and there is no activity at 1.2575 in the first half of the day, buyers may stop the bear market. In such a case, I will hold back from selling until the price performs a false breakout at 1.2610. If there is no downward movement there, I will sell GBP/USD immediately on a rebound from 1.2646, considering a downward correction of 30-35 pips within the day.
COT report:
The Commitments of Traders (COT) report for November 28 showed a sharp decrease in long positions and a minor decline in short ones. The pound is still in demand, as Bank of England Governor Andrew Bailey reiterated that interest rates are likely to remain around current levels for an extended period. This kind of remark helps attract new buyers to the market. In addition, if we also consider the Federal Reserve officials' dovish stance, along with Fed Chair Jerome Powell, it is clear why the pound may continue to rise in the near future. The US will release crucial labor data this week and this may clarify the situation. The latest COT report indicates that non-commercial long positions rose by 17,996 to 61,296, while non-commercial short positions were down by 207 to 69,191. As a result, the spread between long and short positions increased by 2,442. The weekly closing price rose to 1.2701, from 1.2543.
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 1.2535 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.
