Several entry points into the market were formed yesterday. Let's look at the 5-minute chart and analyze what happened. In my morning forecast, I highlighted the 1.3087 level and planned to make decisions based on it. The decline and formation of a false breakout around 1.3087 led to a buy entry for the pound, resulting in a 20-pip increase. In the afternoon, the situation around the level of 1.3087 repeated itself, leading to a recovery in the pair of more than 30 pips.
To open long positions on GBP/USD:
The lack of U.S. data negatively affected the dollar against the British pound. But now all eyes are on the UK's new budget, which will be presented tomorrow, so it is unlikely we will see strong, directional movements in the GBP/USD pair in the near future. An interesting report on retail sales from the Confederation of British Industry will be released in the first half of the day today. It is unlikely to change market dynamics significantly. If the pair declines, only a formation of a false breakout around the support level of 1.3080 will provide a reason to open long positions, targeting a rise to the resistance level of 1.3114, which serves as the upper boundary of the sideways channel. A breakout and reverse test of this range from above will increase the chances of strengthening GBP/USD, leading to the triggering of stop orders from sellers and providing a suitable entry point for long positions with the possibility of an exit at 1.3133. The furthest target will be the 1.3152 area, where I plan to lock in profits. In the event of a decline in GBP/USD and a lack of buying activity at 1.3080, pressure on the pair will increase, leading to a move towards the next support level at 1.3060. Only the formation of a false breakout will create a suitable condition for opening long positions. I plan to buy GBP/USD immediately on the bounce from the low at 1.3038, targeting a 30-35-pip correction within the day.
To open short positions on GBP/USD:
Sellers of the pound showed themselves in the afternoon, especially after threats from major British companies to cease investment in the country if Chancellor Rachel Reeves raises business taxes again. Today, the first sellers are expected only after testing the nearest resistance level of 1.3114; missing this level could mean losing control over the market. A false breakout will be sufficient for selling the pound, targeting a decline towards the support level of 1.3080, where the moving averages lie slightly higher, playing in favor of the bulls. A breakout and reverse test of this range from below will strike a larger blow to buyer positions, triggering stop orders and opening the way to 1.3060. The furthest target will be the 1.3038 area, where I will lock in profits. In the event of a rise in GBP/USD and a lack of activity at 1.3114, buyers will get a chance for a more significant upward movement, which may lead to a spike towards 1.3133. I plan to open short positions there only on a false breakout. If there is no downward movement there, I will sell GBP/USD immediately on the bounce from 1.3152, but only looking for a correction of 30-35 pips within the day.
Recommendations for review:
Due to the shutdown in the U.S., fresh data on the Commitment of Traders is not being published. As soon as the relevant report is prepared, we will publish it immediately. The last available data is only from October 7.
In the COT report (Commitment of Traders), there was a reduction in short positions and an increase in long positions. The pressure on the dollar remains, especially after the recent data that will likely force the U.S. Federal Reserve to continue lowering interest rates. Meanwhile, the Bank of England's policy remains cautious, indicating its clear intent to continue fighting inflation, though this has not particularly instilled confidence in pound buyers recently. The short-term future dynamics of the GBP/USD exchange rate will be determined by new fundamental statistics. The last COT report indicates that long non-commercial positions increased by 3,704 to 84,500, while short non-commercial positions decreased by 912 to 86,464. As a result, the spread between long and short positions narrowed by 627.
Indicator Signals:
Moving Averages
Trading occurs slightly above the 30 and 50-day moving averages, indicating an attempt by the pound to return to growth.
Note: The period and prices of the moving averages are considered by the author on the H1 hourly chart and differ from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands
In the case of a decline, the lower boundary of the indicator around 1.3085 will serve as support.
Description of Indicators:
- Moving Average (MA): Determines the current trend by smoothing out volatility and noise. Period – 50. Highlighted in yellow on the chart.
- Moving Average (MA): Determines the current trend by smoothing out volatility and noise. Period – 30. Highlighted in green on the chart.
- MACD Indicator (Moving Average Convergence/Divergence): Fast EMA – period 12. Slow EMA – period 26. SMA – period 9.
- Bollinger Bands: Period – 20.
- Non-commercial Traders: Speculators such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes, meeting certain requirements.
- Long Non-commercial Positions: The total long open position of non-commercial traders.
- Short Non-commercial Positions: The total short open position of non-commercial traders.
- Total Non-commercial Net Position: The difference between the short and long positions of non-commercial traders.
