GBP/USD: trading plan for the US session on October 18th (analysis of morning deals). The pound maintains equilibrium
October 18, 2023 12:24 pm
In my morning forecast, I drew attention to the level of 1.2179 and recommended making market entry decisions based on it. Let’s take a look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout at this level provided an excellent entry point for buying, resulting in an upward movement of the pair by almost 30 points. The technical picture remained unchanged for the second half of the day.
To open long positions on GBP/USD:
Considering that inflation in the UK has ceased to decline, this may be cause for concern. However, the October figures are expected to be much better, so no significant changes in the regulator’s policy are expected in the near future. Whether GBP/USD continues to decline today will depend on data on the volume of building permits issued and the number of new foundations laid in the United States. Strong indicators will lead to more significant selling, but one should not forget about the statements of Federal Reserve representatives. Dovish statements will limit pressure on the pound, which could maintain the pair’s upward potential. In the event of a decline in the pair, I plan to consider buying only after another false breakout around 1.2179, similar to what I discussed above. In addition, there are moving averages at that level, favoring bulls. In such a scenario, the bulls’ target will be the nearest resistance at 1.2222, which we did not reach during the European session. Breaking and holding above this range will allow buyers to continue the upward correction, with a chance of revisiting 1.2267. The ultimate target will be the 1.2310 area, where I will make a profit. In the case of a decline in the pair and the absence of activity at 1.2179 from buyers in the second half of the day, only a false breakout in the area of the next support at 1.2147 will signal the opening of long positions. I plan to buy GBP/USD immediately on a rebound only from the 1.2109 minimum, targeting a correction of 30-35 points within the day.
To open short positions on GBP/USD:
Sellers also have a chance to regain control of the market and resume the bearish trend. For this to happen, it is very important not to miss the nearest resistance at 1.2222, which may occur after weak US statistics. Only a false breakout at this level will signal a sale capable of pushing the pair towards support at 1.2179. Breaking and retesting from below and upward of this range will deal a more serious blow to the bulls’ positions, paving the way to the lower boundary of the sideways channel at 1.2147. The more distant target will be the 1.2109 area, where I will take a profit. In the event of GBP/USD rising during the American session and the absence of bears at 1.2222, which would be the third test of this level in the past two days, buyers can achieve a breakthrough at this level. In this case, I will postpone selling until a false breakout at 1.2267. If there is no downward movement, I will sell GBP/USD immediately upon a rebound from 1.2310, but only in anticipation of a pair correction downward by 30-35 points within the day.
In the COT report (Commitment of Traders) for October 10, there was a reduction in long and short positions. This only indicates that traders have slightly adjusted their positions ahead of an important report on US inflation, which was released at the end of last week. Considering that US prices continued to rise, this is likely to have a negative impact on the Federal Reserve’s decision regarding interest rates. Therefore, despite a fairly good pound correction, all of this could end with another significant sell-off and a drop in the pair, with a renewal of monthly lows. A considerable number of Federal Reserve representatives are speaking this week, which will serve as a guide for us. The recent COT report states that long non-commercial positions decreased by 7,621 to 66,290, while short non-commercial positions decreased by 4,253 to 76,338. As a result, the spread between long and short positions decreased by 836. The weekly price increased and reached 1.2284 against 1.2091.
Indicator Signals:
Moving Averages
Trading is taking place around the 30 and 50-day moving averages, indicating a sideways market.
Note: The period and prices of the moving averages discussed by the author are on the H1 hourly chart and differ from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands
In case of a decline, the lower boundary of the indicator around 1.2165 will act as support.
Description of Indicators:
Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.MACD indicator (Moving Average Convergence/Divergence – the convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.Bollinger Bands. Period 20.Non-commercial traders – speculators, such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting specific requirements. Long non-commercial positions represent the total long open positions of non-commercial traders.Short non-commercial positions represent the total short open positions of non-commercial traders.The total non-commercial net position is the difference between the short and long positions of non-commercial traders.The material has been provided by InstaForex Company – www.instaforex.com
In my morning forecast, I drew attention to the level of 1.2179 and recommended making market entry decisions based on it. Let’s take a look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout at this level provided an excellent entry point for buying, resulting in an upward movement of the pair by almost 30 points. The technical picture remained unchanged for the second half of the day.
To open long positions on GBP/USD:
Considering that inflation in the UK has ceased to decline, this may be cause for concern. However, the October figures are expected to be much better, so no significant changes in the regulator’s policy are expected in the near future. Whether GBP/USD continues to decline today will depend on data on the volume of building permits issued and the number of new foundations laid in the United States. Strong indicators will lead to more significant selling, but one should not forget about the statements of Federal Reserve representatives. Dovish statements will limit pressure on the pound, which could maintain the pair’s upward potential. In the event of a decline in the pair, I plan to consider buying only after another false breakout around 1.2179, similar to what I discussed above. In addition, there are moving averages at that level, favoring bulls. In such a scenario, the bulls’ target will be the nearest resistance at 1.2222, which we did not reach during the European session. Breaking and holding above this range will allow buyers to continue the upward correction, with a chance of revisiting 1.2267. The ultimate target will be the 1.2310 area, where I will make a profit. In the case of a decline in the pair and the absence of activity at 1.2179 from buyers in the second half of the day, only a false breakout in the area of the next support at 1.2147 will signal the opening of long positions. I plan to buy GBP/USD immediately on a rebound only from the 1.2109 minimum, targeting a correction of 30-35 points within the day.
To open short positions on GBP/USD:
Sellers also have a chance to regain control of the market and resume the bearish trend. For this to happen, it is very important not to miss the nearest resistance at 1.2222, which may occur after weak US statistics. Only a false breakout at this level will signal a sale capable of pushing the pair towards support at 1.2179. Breaking and retesting from below and upward of this range will deal a more serious blow to the bulls’ positions, paving the way to the lower boundary of the sideways channel at 1.2147. The more distant target will be the 1.2109 area, where I will take a profit. In the event of GBP/USD rising during the American session and the absence of bears at 1.2222, which would be the third test of this level in the past two days, buyers can achieve a breakthrough at this level. In this case, I will postpone selling until a false breakout at 1.2267. If there is no downward movement, I will sell GBP/USD immediately upon a rebound from 1.2310, but only in anticipation of a pair correction downward by 30-35 points within the day.
In the COT report (Commitment of Traders) for October 10, there was a reduction in long and short positions. This only indicates that traders have slightly adjusted their positions ahead of an important report on US inflation, which was released at the end of last week. Considering that US prices continued to rise, this is likely to have a negative impact on the Federal Reserve’s decision regarding interest rates. Therefore, despite a fairly good pound correction, all of this could end with another significant sell-off and a drop in the pair, with a renewal of monthly lows. A considerable number of Federal Reserve representatives are speaking this week, which will serve as a guide for us. The recent COT report states that long non-commercial positions decreased by 7,621 to 66,290, while short non-commercial positions decreased by 4,253 to 76,338. As a result, the spread between long and short positions decreased by 836. The weekly price increased and reached 1.2284 against 1.2091.
Indicator Signals:
Moving Averages
Trading is taking place around the 30 and 50-day moving averages, indicating a sideways market.
Note: The period and prices of the moving averages discussed by the author are on the H1 hourly chart and differ from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands
In case of a decline, the lower boundary of the indicator around 1.2165 will act as support.
Description of Indicators:
Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.MACD indicator (Moving Average Convergence/Divergence – the convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.Bollinger Bands. Period 20.Non-commercial traders – speculators, such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting specific requirements. Long non-commercial positions represent the total long open positions of non-commercial traders.Short non-commercial positions represent the total short open positions of non-commercial traders.The total non-commercial net position is the difference between the short and long positions of non-commercial traders.The material has been provided by InstaForex Company – www.instaforex.com
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