GBP/USD trading plan for European session on October 5, 2023. COT report and overview of yesterday’s trades. The pound has
October 5, 2023 9:27 am
Yesterday, the pair formed just one entry signal. Let’s see what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2055 as a possible entry point. The decline and false breakout at this level produced an excellent buy signal, pushing the price up by more than 70 pips. In the afternoon, no other good entry points were formed.
For long positions on GBP/USD:
The UK Services PMI data boosted the pound in the first half of the day, giving buyers confidence that the UK economy may not suffer as much as previously expected. The UK Construction PMI will be released today, which could push the pound higher and renew the day’s high. Traders may also pay attention to the speech of Bank of England Deputy Governor Ben Broadbent. Under current conditions, it’s best to act around the support of 1.2110, formed at the end of yesterday. This is in line with the bullish moving averages. A false breakout at 1.2110 will serve as an entry point for long positions aiming for a recovery towards the target at 1.2172. A breakout and stabilization above this range on the back of good data might pave the way for a bullish correction, bolstering buyers’ confidence. This would signal the opening of long positions targeting 1.2216. The ultimate target would be the 1.2268 area where I’d be looking to take profits. If the pair declines to 1.2110 without buyer activity, bearish pressure on the pound will likely return, opening the path to a low of 1.2056. A false breakout here would signal long entries. I plan to instantly buy GBP/USD on a bounce from the 1.2012 low, aiming for a daily intraday correction of 30-35 pips.
For short positions on GBP/USD:
If the bears plan to return to the market, they should guard the nearest resistance at 1.2172. An ideal scenario would be a false breakout at this level, along with weak Construction PMI data, generating a sell signal with a movement towards the 1.2110 low that was formed yesterday. Breaching this level and subsequently retesting it from below would challenge the bullish sentiment, providing a window to target support at 1.2056, from where the pair has already recovered this week. The more distant target will be 1.2012, where I’d be taking profits. If GBP/USD grows and there are no bears at 1.2172, the demand for the pound may weaken, which will give the bulls a chance to extend the upward correction. In this case, I’d postpone short positions until a false breakout at 1.2216 occurs. If there is no downward movement there, I’d sell the pound on an immediate rebound from 1.2268, aiming for a downward correction of 30-35 pips.
COT report:
The COT (Commitment of Traders) report for September 26 logged a decrease in long positions and a very large increase in short positions. It means there are fewer and fewer buyers of the pound sterling, especially after downbeat UK GDP data. The UK economic growth is expected to slow down significantly in the 3rd quarter. No wonder, the British pound is actively falling against the US dollar. The latest COT report said long non-commercial positions fell by 345 to 84,750, while short non-commercial positions increased by 17,669 to 69,081. As a result, the spread between long and short positions narrowed by 702. The weekly price dipped and stood at 1.2162 against 1.2390.
Indicator signals:
Moving Averages
Trading above the 30- and 50-day moving averages indicates that buyers are trying to extend the upward correction.
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 1.2110 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 just one entry signal. Let’s see what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2055 as a possible entry point. The decline and false breakout at this level produced an excellent buy signal, pushing the price up by more than 70 pips. In the afternoon, no other good entry points were formed.
For long positions on GBP/USD:
The UK Services PMI data boosted the pound in the first half of the day, giving buyers confidence that the UK economy may not suffer as much as previously expected. The UK Construction PMI will be released today, which could push the pound higher and renew the day’s high. Traders may also pay attention to the speech of Bank of England Deputy Governor Ben Broadbent. Under current conditions, it’s best to act around the support of 1.2110, formed at the end of yesterday. This is in line with the bullish moving averages. A false breakout at 1.2110 will serve as an entry point for long positions aiming for a recovery towards the target at 1.2172. A breakout and stabilization above this range on the back of good data might pave the way for a bullish correction, bolstering buyers’ confidence. This would signal the opening of long positions targeting 1.2216. The ultimate target would be the 1.2268 area where I’d be looking to take profits. If the pair declines to 1.2110 without buyer activity, bearish pressure on the pound will likely return, opening the path to a low of 1.2056. A false breakout here would signal long entries. I plan to instantly buy GBP/USD on a bounce from the 1.2012 low, aiming for a daily intraday correction of 30-35 pips.
For short positions on GBP/USD:
If the bears plan to return to the market, they should guard the nearest resistance at 1.2172. An ideal scenario would be a false breakout at this level, along with weak Construction PMI data, generating a sell signal with a movement towards the 1.2110 low that was formed yesterday. Breaching this level and subsequently retesting it from below would challenge the bullish sentiment, providing a window to target support at 1.2056, from where the pair has already recovered this week. The more distant target will be 1.2012, where I’d be taking profits. If GBP/USD grows and there are no bears at 1.2172, the demand for the pound may weaken, which will give the bulls a chance to extend the upward correction. In this case, I’d postpone short positions until a false breakout at 1.2216 occurs. If there is no downward movement there, I’d sell the pound on an immediate rebound from 1.2268, aiming for a downward correction of 30-35 pips.
COT report:
The COT (Commitment of Traders) report for September 26 logged a decrease in long positions and a very large increase in short positions. It means there are fewer and fewer buyers of the pound sterling, especially after downbeat UK GDP data. The UK economic growth is expected to slow down significantly in the 3rd quarter. No wonder, the British pound is actively falling against the US dollar. The latest COT report said long non-commercial positions fell by 345 to 84,750, while short non-commercial positions increased by 17,669 to 69,081. As a result, the spread between long and short positions narrowed by 702. The weekly price dipped and stood at 1.2162 against 1.2390.
Indicator signals:
Moving Averages
Trading above the 30- and 50-day moving averages indicates that buyers are trying to extend the upward correction.
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 1.2110 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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