GBP/USD: trading plan for North American session on October 26. Buyers protect support at 1.2070 but their efforts not enough
October 26, 2023 2:25 pm
In my morning forecast, I paid attention to the level of 1.2070 and recommended making decisions on the market entry with this level in focus. Let’s look at a 5-minute chart and figure out what happened there. The price decrease and a false breakout at this level created an excellent entry point for long positions. As a result, GBP/USD jumped by 25 pips. In the afternoon, the technical picture was not reviewed.
What is needed to open long positions on GBP/USD
Considering that very important US data will be released during the American session, selling pressure on the pound sterling can only escalate. The revised US GDP for the third quarter of 2023 will be available tonight. According to forecasts, the US economic growth should almost double. If this is the case, or the data turns out to be higher than expected, pressure on the pair will increase. So, we will see a breakout of the intraday lows with a new and more active sell-off in GBP/USD. I will act as I did in the morning. I mean I will go long only after a false breakout in the area of the nearest support 1.2070, similar to what was discussed above. The target will be resistance at 1.2103, formed at the session close yesterday. A breakout and consolidation above this area will allow the buyers to return to the market, giving a signal to open long positions with an update of 1.2136, where the moving averages are passing, playing on the side of sellers. The highest target will be the area of 1.2172, where I will take profits. However, we can count on a test of this level on the condition of very disappointing statistics for the US. Under the scenario when GBP/USD declines and there is no activity at 1.2070 from the buyers in the afternoon, only a false breakout in the area of the one-month low of 1.2038 will give a signal to open long positions. I plan to buy GBP/USD immediately at a dip from the low of 1.2012 with the goal of a 30-35-pip correction intraday.
What is needed to open short positions on GBP/USD
The sellers tried to break below 1.2070, but they had bad luck. In the afternoon, only strong US data as well as a speech by FOMC member Christopher Waller will lead to a major sell-off in the pound. In case of weak US data, we will probably see a slight upward correction in GBP/USD which will lead to a surge in the pound. In this case, a false breakout in the resistance area of 1.2103 will produce a sell signal that could push the pair to the low of 1.2070. A breakout and reverse test from the bottom to the top of this area will deal a more serious blow to the positions of the bulls, opening the way to 1.2038, which will allow the development of a new bearish trend. A more distant target will be the low of 1.2012, where I will take profits. If GBP/USD grows and there is no activity at 1.2103 in the afternoon, demand for the pound will revive and the buyers will have a chance for a slight correction. In this case, I will postpone selling until a false breakout at 1.2136. If there is no downward movement even there, I will sell GBP/USD immediately at a rebound from 1.2172, bearing in mind a downward correction of the instrument by 30-35 pips within the day.
In the COT (Commitment of Traders) report for October 17, there was a decrease in long positions and a slight rise in short ones. However, this did not greatly influence the balance of trading forces. Considering that inflation data in the UK signaled that the BoE’s interest rates would remain stable, and Federal Reserve policymakers insist that no one would vote for another rate hike in the near future, all this weakened the position of the US dollar and encouraged a rise in the pound sterling. Apparently, the trend towards strengthening risky assets will continue in the near future until the policy meeting of the Open Market Committee in November. The latest COT report said that long non-commercial positions fell by 753 to 65,537, while short non-commercial positions increased by 408 to 76,746. As a result, the spread between long and short positions narrowed by 51. GBP/USD closed last week lower at 1.2179 against 1.2284 a week ago.
Indicators’ signals
Moving Averages
The instrument is trading below the 30 and 50-day moving averages. It indicates that GBP/USD is expected to decline.
Note: The period and prices of the moving averages are considered by the analyst on the 1-hour chart and differ from the general definition of classic daily moving averages on the daily chart.
Bollinger Bands
In case GBP/USD goes down, the indicator’s lower border at about 1.2065 will act as support.
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 short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
In my morning forecast, I paid attention to the level of 1.2070 and recommended making decisions on the market entry with this level in focus. Let’s look at a 5-minute chart and figure out what happened there. The price decrease and a false breakout at this level created an excellent entry point for long positions. As a result, GBP/USD jumped by 25 pips. In the afternoon, the technical picture was not reviewed.
What is needed to open long positions on GBP/USD
Considering that very important US data will be released during the American session, selling pressure on the pound sterling can only escalate. The revised US GDP for the third quarter of 2023 will be available tonight. According to forecasts, the US economic growth should almost double. If this is the case, or the data turns out to be higher than expected, pressure on the pair will increase. So, we will see a breakout of the intraday lows with a new and more active sell-off in GBP/USD. I will act as I did in the morning. I mean I will go long only after a false breakout in the area of the nearest support 1.2070, similar to what was discussed above. The target will be resistance at 1.2103, formed at the session close yesterday. A breakout and consolidation above this area will allow the buyers to return to the market, giving a signal to open long positions with an update of 1.2136, where the moving averages are passing, playing on the side of sellers. The highest target will be the area of 1.2172, where I will take profits. However, we can count on a test of this level on the condition of very disappointing statistics for the US. Under the scenario when GBP/USD declines and there is no activity at 1.2070 from the buyers in the afternoon, only a false breakout in the area of the one-month low of 1.2038 will give a signal to open long positions. I plan to buy GBP/USD immediately at a dip from the low of 1.2012 with the goal of a 30-35-pip correction intraday.
What is needed to open short positions on GBP/USD
The sellers tried to break below 1.2070, but they had bad luck. In the afternoon, only strong US data as well as a speech by FOMC member Christopher Waller will lead to a major sell-off in the pound. In case of weak US data, we will probably see a slight upward correction in GBP/USD which will lead to a surge in the pound. In this case, a false breakout in the resistance area of 1.2103 will produce a sell signal that could push the pair to the low of 1.2070. A breakout and reverse test from the bottom to the top of this area will deal a more serious blow to the positions of the bulls, opening the way to 1.2038, which will allow the development of a new bearish trend. A more distant target will be the low of 1.2012, where I will take profits. If GBP/USD grows and there is no activity at 1.2103 in the afternoon, demand for the pound will revive and the buyers will have a chance for a slight correction. In this case, I will postpone selling until a false breakout at 1.2136. If there is no downward movement even there, I will sell GBP/USD immediately at a rebound from 1.2172, bearing in mind a downward correction of the instrument by 30-35 pips within the day.
In the COT (Commitment of Traders) report for October 17, there was a decrease in long positions and a slight rise in short ones. However, this did not greatly influence the balance of trading forces. Considering that inflation data in the UK signaled that the BoE’s interest rates would remain stable, and Federal Reserve policymakers insist that no one would vote for another rate hike in the near future, all this weakened the position of the US dollar and encouraged a rise in the pound sterling. Apparently, the trend towards strengthening risky assets will continue in the near future until the policy meeting of the Open Market Committee in November. The latest COT report said that long non-commercial positions fell by 753 to 65,537, while short non-commercial positions increased by 408 to 76,746. As a result, the spread between long and short positions narrowed by 51. GBP/USD closed last week lower at 1.2179 against 1.2284 a week ago.
Indicators’ signals
Moving Averages
The instrument is trading below the 30 and 50-day moving averages. It indicates that GBP/USD is expected to decline.
Note: The period and prices of the moving averages are considered by the analyst on the 1-hour chart and differ from the general definition of classic daily moving averages on the daily chart.
Bollinger Bands
In case GBP/USD goes down, the indicator’s lower border at about 1.2065 will act as support.
Description of indicators
The material has been provided by InstaForex Company – www.instaforex.com
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