GBP/USD: plan for the European session on November 4. COT reports. Pound ignored the Fed's decision on interest rates and

To open long positions on GBP/USD, you need:

Yesterday was a fairly active day for trading the pound. Let's take a look at the 5-minute chart and figure out the entry points. An unsuccessful attempt to break through the support at 1.3612 led to the formation of an excellent entry point for long positions in the pound, which resulted in an active growth of the pair in the first half of the day. Breakout and consolidation above 1.3640 with a similar formation and test of this area from top to bottom - all this gave an additional entry point to long positions in the continuation of the GBP/USD upward trend after the meeting of the Federal Reserve on interest rates. As a result, the upward movement was about 50 points.

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Today we have an important Bank of England meeting on monetary policy at which the central bank will definitely outline its future prospects. There is still talk that the central bank may raise interest rates without cutting the bond buying program - this is a very strong bullish signal for the pound. Therefore, to continue the growth of GBP/USD, it is necessary to return to the resistance of 1.3674. A breakthrough and test of this range from top to bottom will lead to the demolition of a number of bears' stop orders and a larger recovery of the pair to the highs area: 1.3711 and 1.3754, where I recommend taking profits. The next target will be the area of 1.3793, but growth to it will occur in case of cardinal changes in the policy of the Bank of England. In the scenario of a decline in the pair in the first half of the day, an equally important task for the bulls is to protect support at 1.3645, where the moving averages play on their side. Forming a false breakout there will increase the chance for a further upward correction of the pair within the day. If there is no active action on the part of the bulls in the 1.3645 area, the best option for buying the pound will be a test of the next support at 1.3608. However, I advise you to open long positions there only after a false breakout. You can watch buying GBP/USD immediately for a rebound from a new low like 1.3580, or even lower - from support at 1.3546, counting on a correction of 25-30 points within the day.

To open short positions on GBP/USD, you need:

The bears have plenty of chances to reverse the current trend and much will depend on the outcome of the Bank of England meeting. If the policy remains completely unchanged, the bears will be able to turn the market over to their side. The formation of a false breakout in the 1.3674 area will be the first signal to open short positions, which will lead to the formation of pressure on the pound and the return of the bearish trend. This will push the pair to support 1.3645, on which quite a lot depends. There are moving averages, limiting the downward potential. A breakout of 1.3645 and a reverse test from the bottom up will form a signal to open new short positions in the expectation of falling to this month's lows in the 1.3608 area. A breakthrough of this level will provide the bears with a direct way to the lows: 1.3580 and 1.3546, where I recommend taking profits. However, such a scenario will be possible in case of a conservative approach to its policy by the Bank of England. In case of further growth in GBP/USD in the first half of the day and the absence of bears' activity at 1.3674, I recommend selling the pound only after a false breakout is formed in the 1.3711 area. I advise you to open short positions immediately on a rebound from the level of 1.3754, or even higher - from a new high in the area of 1.3793, counting on the pair's rebound down by 20-25 points within the day.

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I recommend for review:

The Commitment of Traders (COT) report for October 19 revealed that short positions decreased while long positions increased, which reflects the upward trend in the pound, observed in the middle of this month. This resulted in the return of the net position of a positive value. Speeches and statements of representatives of the Bank of England claiming that it is necessary to take inflationary pressures more seriously also add to the bulls' confidence. BoE Governor Andrew Bailey's speech last week was well received in the market as he reiterated his stance on changing monetary policy. However, a slight slowdown in monthly and annual inflation growth in the UK limited the pair's upward potential in the middle of the week, which resulted in it being locked in the horizontal channel. I advise you to count on further strengthening of the pound and take advantage of any short-term decline that may occur in case of weak fundamental statistics. The COT report indicated that long non-commercial positions rose from 46,794 to 49,112, while short non-commercials dropped from 58,773 to 47,497. This led to a change in the non-commercial net position from negative to positive. The delta was 1615, against 11,979 a week earlier. The closing price of GBP/USD increased significantly: from 1.3591 to 1.3735.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the continued growth of the pound.

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

A breakthrough of the lower border of the indicator in the area of 1.3765 will lead to a fall in the pound. The breakout of the upper border of the indicator in the area of 1.3810 will form a new upward wave.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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

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