29.10.202109:05 Forex Analysis & Reviews: GBP/USD: plan for the European session on October 29. COT reports. The pound is smoothly returning to this month's highs. Bulls aim to break 1.3802

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. In my morning forecast, I advised you to open short positions when a false breakout from the level of 1.3755 is formed - which is what happened. An unsuccessful attempt to rise above 1.3755 ended with a signal to sell the pound, which, unfortunately, brought losses, as after a while there was a shot above 1.3755 and the removal of stop orders. Then the pair smoothly returned under 1.3755, and it formed another entry point for short positions from the bottom up. The downward movement was more than 25 points, but then the plan for the second half of the day came into play: the formation of a false breakout at 1.3740 resulted in creating an excellent signal to buy the pound, which was fully implemented, which led to a renewal of resistance at 1.3802. Towards the end of the day, one could observe a signal to open short positions at this level, which allowed us to take about 15 points on a downward correction.

Data on lending in the UK will be released in the first half of the day, which is unlikely to have a serious significance on the pound's direction, which will keep the pair's upside potential. For continued growth and return to monthly highs, bulls only need a breakthrough above 1.3802. A reverse test of this level from top to bottom will provide an entry point to long positions, which will make it possible to get to the resistance of 1.3830. A breakdown of this range will lead to the demolition of a number of bears' stop orders and a larger rise in the pair to the highs: 1.3864 and 1.3910, where I recommend taking profits. In case the pair falls in the first half of the day, an equally important task is to protect support at 1.3765, where the moving averages play on their side. Forming a false breakout there will increase the chance for a further upward correction within the day. In case the bulls are not active in the area of 1.3765, the best option for buying the pound will be the test of the next support at 1.3731. However, I advise you to open long positions there only after a false breakout. You can observe long positions on GBP/USD immediately for a rebound from a new low like 1.3697, or even lower - from support at 1.3668, counting on a correction of 25-30 points within the day.

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

Pound bears have fewer and fewer chances to reverse the current trend. Forming a false breakout in the 1.3802 area will result in creating a sell signal, which will push the pair to the support of 1.3765, where the moving averages, limiting the downside potential, pass. A breakthrough of 1.3765 and a reverse test from the bottom up will create a signal to open new short positions in anticipation of a fall to the lower border of the horizontal channel at 1.3731, the breakdown of which will provide the bears with a direct path to lows: 1.3697 and 3668, where I recommend taking profits. However, such a scenario will be possible in case of strong fundamental statistics on the US economy. In case of further growth in GBP/USD in the first half of the day and the absence of bears' activity at 1.3802, I advise you to sell the pound only after a false breakout is formed at monthly highs around 1.3830. I advise you to open short positions immediately on a rebound from the level of 1.3864, or even higher - from a new high in the area of 1.3910, counting on the pair's rebound down by 20-25 points within the day.

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.