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In this morning's outlook, I pointed out several support and resistance levels that were not hit by the pair. Let us look at the 5-minute chart and figure out what happened. Amid low volatility in the first half of the day, the pound sterling remained flat in a sideways channel after its sell-off during the Asian session. GBP ignored today's remarks by a BoE policymaker. As a result, the technical outlook for the second half of the day had to be reconsidered.
When to open long positions on GBP/USD:
The main goal for GBP bulls is to return the new resistance level of 1.1833, which was formed during the European session, under their control. It will be quite difficult to do that, as there are no important US data releases and there is nothing that could be used to make a move. The Chicago Fed National Activity Index is unlikely to make the pound sterling move in any direction. Certainly, in the current situation, the best option for opening long positions will be a drop of GBP to the nearest support at 1.1768, which I mentioned in the morning. Only a false breakdown below this level will create a good entry point for long positions, assuming that the pound returns to market equilibrium and breaks above the resistance at 1.1833. A breakout and a downward test of this range will create a buy signal, with 1.1890 being the target. There are moving averages in this area which benefit bearish traders. The most distant target is the high of 1.1947, where I recommend taking profits. If the bulls fail to meet the targets in the second half of the day and lose 1.1768, there will be a larger profit taking. This will bring back the pressure on the pair, opening the way to 1.1714. Long positions should be opened only during a false breakout. You can buy GBP/USD immediately if it bounces from 1.1650 or even 1.1594, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
The main goal for GBP/USD bears is to hold on to 1.1833. A false breakdown of this level at the beginning of the American session will create a sell signal. Then, the pair can potentially move to 1.1768, where the buyers will act more strongly. A breakout and an upward retest of 1.1768, as well as strong US data showing that the American economy remains stable, will create an entry point, assuming that the pound returns to 1.1714, where bears will also face some difficulties. The most distant target is 1.1650, where I recommend taking profits. If the pair does not make any active downward movement after a false breakout of 1.1833, bulls may resume buying GBP, which will push the pair up towards 1.1890. A false breakout of this level will create an entry point for short positions with a downside target. If trading activity remains low at this level, you can sell GBP/USD immediately after a bounce from 1.1947, keeping in mind a downward intraday correction of 30-35 pips.
COT report:
The latest Commitment of Traders (COT) report from November 8 showed that short positions decreased, while long positions increased. The results of the Bank of England's policy meeting have affected the situation in the market. Demand for cheap GBP remains, even though the regulator does not plan to carry out aggressive monetary policy. The pound sterling found support in lower-than-expected US inflation data. However, it is unclear how long GBP will stay at its current highs. Problems in the UK economy, which were confirmed by the latest GDP data, continue to put pressure on the government and the Bank of England. The regulator's policy is slowing down the economy more and more. If the upcoming labor market data turn out to be negative, the pound sterling could drop sharply. According to the COT report, the number of long non-commercial positions increased by 1,651 to 36,630. Short non-commercial positions fell by 3,450 to 76,365. As a result, the net non-commercial position fell to -39,735 from -44,836 a week ago. The weekly closing price rose to 1.1549 from 1.1499.
Indicators' signals:
Moving averages
Trading is carried out below the 30-day and 50-day moving averages, which indicates that the pair is under renewed pressure.
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If GBP/USD moves up, the indicator's upper border at 1.1930 will serve as resistance.
Description of indicators
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.
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