GBP/USD trading plan for European session on October 18, 2023. COT report and overview of yesterday’s trades. The British
October 18, 2023 9:26 am
Yesterday, the pair formed several entry signals. Let’s see what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2185 as a possible entry point. A breakout and retest of this range produced a sell signal, sending the pair down by about 40 pips. Long positions on a false breakout from 1.2154 made it possible to take 20 pips of profit. In the afternoon, selling from 1.2181 brought about 50 pips of profit, and defending the daily low of 1.2147 produced a buy signal which made it possible for traders to take about 60 pips.
For long positions on GBP/USD:
The British pound strengthened slightly after UK inflation data. Consumer prices inflation remained at 6.7% in September, which makes things ambiguous for the Bank of England, which planned to complete the cycle of interest rate hikes. However, the pound’s growth did not affect the balance of power, and the pair continues to trade within the sideways channel. Under current conditions, I plan to buy after a false breakout near 1.2179 – the middle of the sideways channel, which is in line with the bullish moving averages. In this case, it’s best to act around the nearest resistance at 1.2222. A breakout and consolidation above this range will extend the bullish correction, making it possible to update 1.2267. The more distant target will be 1.2310 area, where I’d be taking profits. If the pair declines to 1.2179 without buyer activity, only a false breakout near the next support at 1.2147 will signal opening long positions. I plan to instantly buy GBP/USD on a bounce from the 1.2109 low, aiming for a daily intraday correction of 30-35 pips.
For short positions on GBP/USD:
The bears have a good chance of regaining control of the market and restoring the downtrend. Today, it is crucial to defend the resistance level at 1.2222, where the pair is heading now. A false breakout at this level will produce a sell signal, which could push the pair towards the support level at 1.2179. Breaching this level and subsequently retesting it from below will deal a more serious blow to the bulls’ positions, providing a window to aim for the lower band of the sideways channel at 1.2147. The more distant target will be 1.2109, where I’d be taking profits. If GBP/USD grows and there are no bears at 1.2222, the demand for the pound will return and the bulls will have a chance to continue the upward correction. In such a scenario, I will refrain from going short until a false breakout at 1.2267. If downward movement stalls there, one can sell the British pound on a bounce from 1.2310, bearing in mind a 30-35-pips downward intraday correction.
COT report:
In the COT (Commitment of Traders) report for October 10, we see a decrease in both long and short positions. This suggests that traders made slight adjustments to their positions ahead of a rather important US inflation report released at the end of the previous week. Given that US prices continue to rise, it’s likely to negatively impact the Federal Reserve and its decisions regarding interest rates. So, despite the pound’s recent attempts at correcting higher, it could end with another sell-off and the pair could fall to new monthly lows. This week, there are quite a number of Federal Reserve officials who are scheduled to speak, which will serve as an important reference point. The latest COT report said that long non-commercial positions fell by 7,621 to 66,290, while short non-commercial positions dropped by 4,253 to 76,338. As a result, the spread between long and short positions narrowed by 836. The weekly price reached 1.2284 versus 1.2091 in the previous week.
Indicator signals:
Moving Averages
Trading around the 30- and 50-day moving averages indicates a sideways trend.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If the pair declines, the lower band of the indicator around 1.2147 will act as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• 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 represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
Yesterday, the pair formed several entry signals. Let’s see what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2185 as a possible entry point. A breakout and retest of this range produced a sell signal, sending the pair down by about 40 pips. Long positions on a false breakout from 1.2154 made it possible to take 20 pips of profit. In the afternoon, selling from 1.2181 brought about 50 pips of profit, and defending the daily low of 1.2147 produced a buy signal which made it possible for traders to take about 60 pips.
For long positions on GBP/USD:
The British pound strengthened slightly after UK inflation data. Consumer prices inflation remained at 6.7% in September, which makes things ambiguous for the Bank of England, which planned to complete the cycle of interest rate hikes. However, the pound’s growth did not affect the balance of power, and the pair continues to trade within the sideways channel. Under current conditions, I plan to buy after a false breakout near 1.2179 – the middle of the sideways channel, which is in line with the bullish moving averages. In this case, it’s best to act around the nearest resistance at 1.2222. A breakout and consolidation above this range will extend the bullish correction, making it possible to update 1.2267. The more distant target will be 1.2310 area, where I’d be taking profits. If the pair declines to 1.2179 without buyer activity, only a false breakout near the next support at 1.2147 will signal opening long positions. I plan to instantly buy GBP/USD on a bounce from the 1.2109 low, aiming for a daily intraday correction of 30-35 pips.
For short positions on GBP/USD:
The bears have a good chance of regaining control of the market and restoring the downtrend. Today, it is crucial to defend the resistance level at 1.2222, where the pair is heading now. A false breakout at this level will produce a sell signal, which could push the pair towards the support level at 1.2179. Breaching this level and subsequently retesting it from below will deal a more serious blow to the bulls’ positions, providing a window to aim for the lower band of the sideways channel at 1.2147. The more distant target will be 1.2109, where I’d be taking profits. If GBP/USD grows and there are no bears at 1.2222, the demand for the pound will return and the bulls will have a chance to continue the upward correction. In such a scenario, I will refrain from going short until a false breakout at 1.2267. If downward movement stalls there, one can sell the British pound on a bounce from 1.2310, bearing in mind a 30-35-pips downward intraday correction.
COT report:
In the COT (Commitment of Traders) report for October 10, we see a decrease in both long and short positions. This suggests that traders made slight adjustments to their positions ahead of a rather important US inflation report released at the end of the previous week. Given that US prices continue to rise, it’s likely to negatively impact the Federal Reserve and its decisions regarding interest rates. So, despite the pound’s recent attempts at correcting higher, it could end with another sell-off and the pair could fall to new monthly lows. This week, there are quite a number of Federal Reserve officials who are scheduled to speak, which will serve as an important reference point. The latest COT report said that long non-commercial positions fell by 7,621 to 66,290, while short non-commercial positions dropped by 4,253 to 76,338. As a result, the spread between long and short positions narrowed by 836. The weekly price reached 1.2284 versus 1.2091 in the previous week.
Indicator signals:
Moving Averages
Trading around the 30- and 50-day moving averages indicates a sideways trend.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If the pair declines, the lower band of the indicator around 1.2147 will act as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• 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 represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
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