To open long positions on GBP/USD, you need:
The British pound has remained within the horizontal channel, in which it has been stuck since Monday evening. Fundamental data on the growth rate of the service sector in the UK in September this year did not allow the bulls to go above the highs in the 1.3642 area. Let's take a look at the 5 minute chart and talk about what happened. An unsuccessful attempt to rise above 1.3622 in the first half of the day and the formation of a false breakout there - all this formed a signal to open short positions in the pound, but this did not lead to a large sale within the day. The absence of bears at the beginning of the US session pushed the pair to the next resistance at 1.3636, where another signal to sell the pound was formed. It turned out to be more successful, which led to a 36-point drop.
Among today's fundamental reports, we expect only data on the PMI index for the UK construction sector, which is unlikely to help the British pound, which is clearly looking at the break of the intermediate support at 1.3601. The direction of the pair in the first half of the day will depend on this level, which is why it is so important for the bulls to protect it. Only a false breakout in this range will lead to a signal to open long positions in order to return to the resistance area of 1.3642. Only a breakthrough of this level and a reverse test of it from top to bottom will lead to forming an additional signal to buy GBP/USD in order to continue the upward correction to the high of 1.3690. The next target will be the area of 1.3726, where I recommend taking profits. The fact that trading is already taking place in the area of the moving averages indicates that the bulls are in trouble. In case GBP/USD falls and the bulls are not active in the 1.3601 area, it is best not to rush with long positions. The best option would be to buy the pound from the larger support at 1.3569, but also if a false breakout is formed. I advise to open long positions in GBP/USD immediately on a rebound in the 1.3534 area, or even lower - from 1.3490, counting on an upward correction of 15-20 points within the day.
To open short positions on GBP/USD, you need:
The initial task of the bears is to surpass and consolidate below 1.3601, which was not done yesterday afternoon. Only an update of this level from the bottom up, along with the weak data on the UK construction sector, form an entry point for short positions in hopes of a resumption of the bear market and with the goal of updating support at 1.3569. A similar breakdown of this range will result in forming another entry point to sell the pound, which will open a direct road to the lows of 1.3534 and 1.3490, where I recommend taking profits. An equally important task for the bears is to protect resistance at 1.3642, which can be tested in case of strong data and a return in demand for the British pound. Only a false breakout at 1.3642 can seriously harm the bulls' plans. If the bears manage to defend the aforementioned range, we can expect GBP/USD to fall to the support area of 1.3601, and then according to the scenario I described above. If the bears are not active in the 1.3642 area, serious problems with a further bearish trend may begin. In this case, it is best to postpone selling until the next major resistance at 1.3690, from where you can open short positions immediately on a rebound, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) report for September 28 revealed both a sharp rise in short ones and an increase in those who bet on the pound's succeeding growth. The British pound has been falling for almost the entire week amid the fuel crisis that has flared up. Supply chain problems have led to disruptions in the supply of fuel to gas stations, and an acute shortage of drivers has prompted British Prime Minister Boris Johnson to engage the military. The corresponding reaction of the buyers of risky assets followed immediately and the pound fell against the US dollar. Strong data on the growth of the UK economy in the second quarter of this year, which was revised upward, did not help the pound much, however, perhaps due to them, the pressure on the pair slightly decreased, and traders recalled the statements of the Bank of England on monetary policy about the fact that decisions to change it can be made as early as November this year. The only problem that stands in the way of the bulls is the US Federal Reserve, which, although not going to raise interest rates, is also on the path of tightening monetary policy. I have repeatedly advised to buy the pound in case of significant corrections. This happened last week as well. After a sharp decline, traders seized the moment and bought it back at attractive prices. The COT report indicated that long non-commercial positions rose from 51,910 to 57,923, while short non-commercials jumped from 52,128 to 55,959, leading to a partial build-up of bulls' advantage over bears. As a result, the non-commercial net position regained its positive value and increased from -218 to 1964. The closing price of GBP/USD increased to 1.3700 against 1.3662 by the end of the week.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates the possibility of completion of the upward correction of the pound.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
A breakthrough of the upper border of the indicator in the area of 1.3642 will lead to a new wave of growth of the pound. Surpassing the lower boundary at 1.3601 will increase the pressure on the pair.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between short and long positions of non-commercial traders.
