To open long positions on GBP/USD, you need:
The first half of the day, although it led to the formation of several signals to enter the market, all of them did not bring the expected profit. Investors' caution after the release of data on the UK labor market did not allow the bulls to build a larger upward correction. Let's look at the 5-minute chart and figure out what happened. Immediately after the publication of the reports, the pound rose, but the bears made a false breakdown at the level of 1.3458, forming a signal to open short positions there. After some time, the bulls again climbed above 1.3458, testing this level from top to bottom, which led to the closure of short positions and the opening of long ones, hoping for the continuation of the upward trend after the good news – but even then, the pair fell below 1.3458 and at the time of writing was trading lower. Because of this, we had to revise all the levels and the technical picture.
In the afternoon, we are expecting important data on changes in retail trade and changes in industrial production in the United States of America. If the indicators show a sharp slowdown against the background of high inflation, the pressure on the US dollar may increase. If not, the bears will try to take control of the market again. However, do not forget to monitor the situation developing now around the Brexit agreement, as this does not add confidence to the buyers of the pound. The main task of the bulls for the second half of the day is to protect the 1.3431 level, just below which the moving averages are playing on the buyers' side. Only the next formation of a false breakdown there, together with a test of moving averages, form a buy signal against the trend. This will return the chance of continuing the correction of the pair to the area of 1.3494. An equally important task will be to regain control over this level: a breakthrough and a reverse test from top to bottom of 1.3494 will give an additional signal to buy the pound, which will lead to an upward movement to the area of 1.3534 with the prospect of reaching a maximum of 1.3567, where I recommend fixing profits. In the scenario of a decline in the pair in the afternoon, the best option for buying the pound will be a test of the next support - 1.3365. However, I advise you to open long positions there only after a false breakdown. You can watch the GBP/USD purchases immediately on the rebound from the new low - 1.3308, or even lower - from the support of 1.3254, counting on a correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
Bears will try to regain control of the market immediately after the US retail sales data. Only a breakout and consolidation below 1.3431 with a reverse test from the bottom up will increase the pressure on the pair, which will give a signal to sell along with the trend to reduce to the minimum of this week – 1.3365. A breakdown of this range will surely quickly dump GBP/USD already in the area of 1.3308 and 1.3254, where I recommend fixing profits. If the pair grows after a poor report on retail sales and industrial production in the United States, I advise you to wait for a false breakdown in the area of a new resistance - 1.3494. In the absence of sellers at this level, it is possible to open short positions immediately for a rebound from 1.3534, or even higher - from a new maximum in the area of 1.3567, counting on the pair's rebound down by 20-25 points inside the day.
The COT reports (Commitment of Traders) for November 9 recorded an increase in short and a sharp reduction in long positions, which led to the appearance of a negative delta. Weak data on GDP growth in the UK in the 3rd quarter of this year, as well as the risk of a more serious slowdown in retail sales in the 4th quarter due to high inflation, led to a fall in the pound and continued pressure on it. An important point was the deterioration of the situation around the Server Ireland protocol, which the UK authorities plan to suspend in the near future, to which the European Union is preparing to introduce certain retaliatory measures – this does not add confidence to buyers of the British pound. At the same time, in the United States of America, we are witnessing an increase in inflation and increased talk about the need for an earlier increase in interest rates next year, which provides significant support to the US dollar. However, I recommend sticking to the strategy of buying the pair in case of very large falls, which will occur against the background of uncertainty in the policy of the Central Bank. The COT report indicates that long non-commercial positions decreased from the level of 57,255 to the level of 54,004, while short non-commercial positions strengthened from the level of 42,208 to the level of 66,097. This led to a change in the non-commercial net position in the negative direction. The delta was -12,093 against 15,047 a week earlier. The weekly closing price of GBP/USD has significantly collapsed as a result of the policy of the Bank of England, from 1.3654 to 1.3563.
Signals of indicators:
Moving averages
Trading is conducted slightly above the 30 and 50 day moving averages, which preserves the chance for buyers of the pound for an upward correction of the pair.
Note. The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
A breakthrough of the upper limit of the indicator in the area of 1.3470 will lead to a new wave of growth of the pound. A break of the lower limit of the indicator in the area of 1.3385 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. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit 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 the short and long positions of non-commercial traders.
