Yesterday, several entry points were formed in the market. Let's take a look at the 5-minute chart and analyze what happened there. In my morning forecast, I highlighted the 1.3182 level and planned to base my trading decisions on it. The breakout and subsequent retest of 1.3182 provided a sell entry for the pound, resulting in a 15-pip decline in the pair. In the second half of the day, long positions on the false breakout around 1.3132 resulted in a sharp increase in the pair of more than 80 pips. Active bearish movements in the area of 1.3211 provided an entry point for short positions, which led to a correction of more than 30 pips back to the area of 1.3182, where buyers reappeared, continuing the development of the bullish market.
For Opening Long Positions on GBP/USD:
The publication of the UK budget went relatively smoothly; however, the proposed tax measures and methods to close budget gaps stimulated new purchases of the pound, as these are likely to increase inflationary pressure in the near term, compelling the Bank of England to act very cautiously. Today, aside from the speech by Bank of England Monetary Policy Committee member Megan Green, there are no other significant data, so it is likely that the growth of the British pound will continue. In the case of a small correction for the pair in the first half of the day, I expect the first manifestation of buyers around 1.3247. Only the formation of a false breakout there will provide an opportunity to open long positions with the aim of further growth of the pair towards the resistance level of 1.3277. A breakout and subsequent retest from above this range will increase the chances for strengthening GBP/USD, leading to the triggering of stop-loss orders for sellers and providing a suitable entry point for long positions with the potential to rise to 1.3310. The furthest target will be around 1.3339, where I plan to take profits. In the scenario of a decline in GBP/USD and a lack of buying activity at 1.3247, selling pressure will increase, leading to movement towards the next support level of 1.3219. Only the formation of a false breakout there will be a suitable condition for opening long positions. I plan to buy GBP/USD immediately on a bounce from the low at 1.3185, aiming for a correction of 30-35 pips within the day.
For Opening Short Positions on GBP/USD:
Sellers of the pound capitulated after the publication of the UK budget, and one cannot count on their appearance today. In the event of further strengthening of the pair, I expect the first sellers to appear only after testing the resistance at 1.3277. Only the formation of a false breakout there will provide a reason to sell the pound, targeting a move towards support at 1.3247, which is an intermediate level. A breakout and retest from below this range will inflict a larger blow to buyer positions, leading to the triggering of stop-loss orders and opening the path to 1.3219, where moving averages favor the bulls. The furthest target will be the area around 1.3185, where I will take profits. In the event of further GBP/USD growth and the absence of activity at 1.3277, buyers will continue to build the trend, which may lead to a surge towards 1.3310. I also 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 a bounce from 1.3339, but only anticipating a correction of the pair downwards by 30-35 pips within the day.
Recommended for Review:
Due to the shutdown in the U.S., fresh data on the Commitment of Traders (COT) is not being published. As soon as the current report is prepared, we will publish it immediately. The last relevant data is from October 7.
In the COT report, short positions have decreased and long positions have increased. The pressure on the dollar continues—especially after the latest data, which will likely compel the Federal Reserve to keep lowering interest rates. Meanwhile, the Bank of England's policy remains cautious, indicating its clear plans for further battling inflation. The short-term future dynamics of the GBP/USD exchange rate will be determined by new fundamental data. The latest COT report indicates that non-commercial long positions increased by 3,704 to a total of 84,500, while non-commercial short positions decreased by 912 to a total of 86,464. As a result, the spread between long and short positions narrowed by 627.
Indicator Signals:
Moving Averages
- Trading is taking place above the 30 and 50-day moving averages, indicating potential further growth of the pair.
Note: The period and prices of the moving averages are examined by the author on the hourly chart (H1), which differs from the general definition of classic daily moving averages on the daily chart (D1).
Bollinger Bands
- In the event of a decline, the indicator's lower boundary around 1.3185 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.
