Long positions on GBP/USD:
Last Friday, several profitable entry signals were generated. Let us look at the M5 chart and analyze those entry points. In the first half of the day, a clear buy signal was produced from the level of 1.3316. After a modest drop in the pound sterling during the European session, buyers provided strong support for the pair. The price broke through 1.3316 and rose above it. A retest of this mark from top to bottom led to the formation of a buy signal. As a result, the price went up by 30 pips. In the second half of the day, the quote failed to reach the resistance level of 1.3352. So, no signals were generated there. However, by the close of the North American session, the formation of another false breakout at 1.3308 produced a buy entry point, and the sterling grew by 40 pips.
Today, amid a lack of important fundamentals in the United Kingdom, the only macroeconomic statistics to draw investors' attention will be the mortgage market data, which is unlikely to provide support for the pound. Nevertheless, the pair may still retrace upward in the first half of the day. A breakout at 1.3360 and its test from top to bottom could make an excellent entry point. If so, the bearish trend may end, with GBP/USD recovering to 1.3388. In case bulls do not stop there and push the price further up, the target will be seen at the high of 1.3446 where traders should lock in profit. Alternatively, if the quote moves in a downtrend during the European session, traders could consider entering long positions only after a false breakout of the middle boundary of the sideways channel at 1.3322. Moving averages are located at that level, which should provide support for bulls. Long positions could also be opened immediately on a bounce from the weekly low of 1.3279, allowing a 20-25 pips intraday correction.
Short positions on GBP/USD:
Bears' task for today will be to protect the resistance level of 1.3360. A false breakout there could produce a new sell entry point with the target at 1.3322, the middle of the sideways channel. Bulls are now trying to return the pair to 1.3360. The GBP/USD is expected to extend its downward movement only in case of a breakout and consolidation below this range. Its retest from bottom to top is likely to form an excellent entry point. If so, the pair could go down to the weekly low of 1.3279, where traders should lock in profit. Alternatively, if the pair shows growth during the European session and there is a sluggish bearish activity at 1.3360, short positions should be opened after the quote reaches the resistance level of 1.3388 and only after a false breakout. Short positions could be opened immediately on a bounce from the resistance level of 1.3446 or the new high at around 1.3494, allowing a 20-25 pips intraday correction.
The Commitments of Traders report as of November 16 logged a sharp rise in short positions and a decrease in long ones, which led to a negative delta. Optimistic labor market results in the UK, an increase in inflationary pressure, as well as retail sales, provided support for the pound sterling in the previous week, allowing bulls to extend the uptrend. However, amid the alarming coronavirus situation in Europe and the Bank of England's statement that it would not rush to change monetary policy under the current circumstances exerted pressure on the pair by the end of the week. The issue of the Northern Ireland protocol that the UK authorities are planning to suspend in the near future is another negative factor for the pound. The European Union is also preparing to introduce certain retaliatory measures. At the same time, inflation is accelerating in the United States. Expectations that the Federal Reserve will raise the interest rate earlier next year provide strong support for the greenback. Nevertheless, traders should stick to the strategy of buying the pair after sharp drops that are likely to take place due to the central bank's stance on monetary policy. The COT report showed that long non-commercial positions declined to 50,443 from 54,004, while short non-commercial positions rose to 82,042 from 66,097. This led to an increase in the negative non-commercial net position: -31 599 versus -12,093 a week earlier. The weekly closing price plunged to 1.3410 from 1.3563 due to the Bank of England's stance on monetary policy.
Indicator signals:
Trading is carried out above the 30-day and 50-day moving averages, indicating bulls' attempt to form an upward correction.
Moving averages
Note: The period and prices of moving averages are viewed by the author on the hourly H1 chart and differ from the general definition of classic daily moving averages on the D1 chart.
Bollinger Bands
The indicator has not produced any signals due to low volatility.
Indicator description:
- Moving average (MA) determines the current trend by smoothing volatility and noise. Period 50. Colored yellow on the chart.
- Moving average (MA) determines the current trend by smoothing volatility and noise. Period 30. Colored green on the chart.
- Moving Average Convergence/Divergence (MACD). Fast EMA 12. Slow EMA 26. SMA 9.
- Bollinger Bands. Period 20
- 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 are the total long position of non-commercial traders.
- Non-commercial short positions are the total short position of non-commercial traders.
- The total non-commercial net position is the difference between short and long positions of non-commercial traders.
