In my morning forecast, I highlighted the 1.2681 level and planned to base my trading decisions on it. Let's examine the 5-minute chart to analyze what happened. A rise followed by a false breakout near 1.2681 created an opportunity to enter a short position, resulting in a drop of over 30 points. The technical outlook was slightly revised for the second half of the day.
To Open Long Positions on GBP/USD:
Although UK GDP data was expected to be weak, figures below economists' forecasts put more pressure on the pound in the first half of the day. However, as seen on the chart, there was no large-scale sell-off, so bulls still have an opportunity. The focus now shifts to US data. In the second half of the day, key reports on retail sales and industrial production in the US will be released. If these strong reports do not trigger a fresh wave of pound selling, we could see another recovery.
A false breakout near the 1.2632 support will provide a valid entry point for long positions, aiming for a recovery toward 1.2681, a level that has yet to be breached. A breakout and retest of the 1.2681–1.2632 range after the data will provide a new entry point for long positions, targeting 1.2723. The furthest target will be 1.2762, where I plan to take profit.
In the event of further declines in GBP/USD and a lack of buying pressure at 1.2632, the bearish trend will continue, opening the way to 1.2583. A false breakout at this level will provide a suitable condition for opening long positions. Alternatively, I plan to buy GBP/USD on a rebound from the 1.2550 low, targeting an intraday correction of 30-35 points.
To Open Short Positions on GBP/USD:
Given how oversold the pound is, ignoring strong US statistics, similar to yesterday, could spark a significant upward correction at the end of the week. Therefore, I won't rush into selling. If the pair rises, a false breakout near the 1.2681 resistance, combined with a jump in US retail sales, will provide a suitable entry point for short positions, targeting a move toward 1.2632, the monthly low. A breakout and retest from below will strike a blow to bulls' positions, triggering stop orders and opening the way to 1.2583. The furthest target will be 1.2550, where I plan to take profit.
If GBP/USD rises in the second half of the day and shows inactivity at 1.2681, where moving averages favor sellers, buyers may attempt a larger correction. Bears will then retreat to the 1.2723 resistance area. I will sell only on a false breakout there. If no downward movement occurs, I will look for short positions on a rebound near 1.2762, targeting an intraday correction of 30-35 points.
The Commitment of Traders (COT) report for November 5 showed a reduction in long positions and a significant growth in short positions. Despite strong market changes, the data does not account for Donald Trump's US presidential victory or the Bank of England's rate cuts during its November meeting.
- Non-commercial long positions decreased by 11,899 to 120,737.
- Non-commercial short positions increased by 9,373 to 75,653.
- The gap between long and short positions widened by 1,079 positions.
This suggests ongoing pressure on the pound, with short positions gaining strength. Over the last three months, long positions have risen from 102,000 to 120,000, while shorts have grown from 55,000 to 76,000. Professional traders may continue to reduce long positions or increase short ones, as most bullish factors for the pound have already been priced in. Technical analysis also supports further pound declines.
Indicator Signals:
Moving Averages:Trading occurs below the 30- and 50-day moving averages, indicating continued pound weakness.
Bollinger Bands:Support is located at the lower boundary near 1.2645 in case of further declines.
Indicator Descriptions:
- Moving Average (MA): Smoothens volatility to show the current trend.
- 50-period MA is yellow.
- 30-period MA is green.
- MACD Indicator: Identifies overbought and oversold levels.
- Fast EMA: 12-period, Slow EMA: 26-period, SMA: 9-period.
- Bollinger Bands: Measures volatility using a 20-period setting.
- Non-commercial traders: Speculators, such as individual traders, hedge funds, and large institutions, using the futures market for speculative purposes.
- Net non-commercial position: The difference between short and long positions among non-commercial traders.
