Fundamental analysis

GBP/USD: the plan for the American session on October 28 (analysis of morning deals). The pound has adjusted significantly,

In my morning forecast, I paid attention to the 1.1538 level and recommended making decisions on entering the market there. Let’s look at the 5-minute chart and figure out what happened. After the breakdown and the reverse test from the bottom up of the 1.1538 level, a sell signal was formed, which resulted in the pound moving down by about 30 points. However, we did not reach the designated next support. For the second half of the day, the technical picture has been completely revised.

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

Data on the level of expenditures and incomes of the US population are scheduled for the US session, which may lead to an even greater strengthening of the US dollar against the pound. However, the downward movement may be limited, since even yesterday’s excellent report on US GDP growth rates in the 3rd quarter of this year did not affect the pound and did not lead to its sharp downward movement. If Americans’ spending increases, we can assume that the US economy will also maintain a good growth rate in the 4th quarter. The only thing that can overshadow the life of dollar buyers is data on changes in the volume of pending home sales transactions. In the case of a decline in the pound in the afternoon, only another false breakdown in the area of the new support of 1.1505, formed at the end of the first half of the day, will give a buy signal with a return to the resistance of 1.1560, where the moving averages are playing on the sellers’ side. Without this level, it will be difficult to count on the further building of the bull market. Only after getting above this range, it will be possible to talk about the continuation of the trend. A breakdown of 1.1560, as well as a reverse test from top to bottom, will open the way to a maximum of 1.1626, and then it will be close to the resistance of 1.1683, where it will become more difficult for buyers to control the market. A more distant target will be the 1.1722 area, which will lead to a fairly large capitulation of sellers – I recommend fixing profits there. If GBP/USD falls and there are no buyers at 1.1505, the pressure on the pound will increase, which will open a direct road to 1.1470. I advise you to buy there only on a false breakdown. It is possible to open long positions on GBP/USD immediately for a rebound from 1.1432, or around the minimum of 1.1392 with the aim of correction of 30-35 points within a day.

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

Bears are trying to regain control of the market, but it is very problematic for them. There was a slight risk aversion after yesterday’s data, but even this is not enough to break the bull market observed on October 21. Objectively, sellers need to defend with all their might the new resistance of 1.1560 formed in the first half of the day. In the case of GBP/USD growth against the background of weak US statistics, only the formation of a false breakdown there will give a sell signal in the expectation of a return of pressure on the pound and its repeated correction to the nearest support of 1.1505. A breakout and a reverse test from the bottom up of this range will give an entry point for sale already with the update of the 1.1470 minimum. A more distant target will be the 1.1432 area, where I recommend fixing the profits. With the option of GBP/USD growth and the absence of bears at 1.1560 in the afternoon, the situation will return to the control of buyers, which will lead to the growth of GBP/USD in the area of a maximum of 1.1626. Only a false breakout at this level forms an entry point into short positions in the expectation of a new downward movement of the pair. In case of lack of activity, there may also be a jerk up to the maximum of 1.1683, where I advise you to sell GBP/USD immediately for a rebound, counting on the pair’s rebound down by 30-35 points within a day.

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The COT report (Commitment of Traders) for October 18 recorded a sharp reduction in long positions and an increase in short ones. The resignation of British Prime Minister Liz Truss and the appointment of Rishi Sunak to her post had a positive impact on the British pound, however, rising inflation in the UK did not allow investors to fully believe that the economy would be able to withstand everything that awaits it in the near future: an increase in the cost of living crisis, the growth of the energy crisis and high-interest rates. Also, quite recently, a sharp decline in retail sales was recorded in the UK – the main engine of economic growth, which once again confirms the fact that households have serious problems due to high prices, discouraging all desire to spend extra money. Until the UK authorities sort out the problems and find a way out of the current situation, the pressure on the pound will continue. The latest COT report indicates that long non-commercial positions decreased by 8,651, to the level of 40,328, while short non-commercial positions increased by 3,390, to the level of 91,539, which led to a slight increase in the negative value of the non-commercial net position to -51,211 versus -39,170. The weekly closing price rose to 1.1332 against 1.1036.

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Signals of indicators:

Moving Averages

Trading is conducted below the 30 and 50-day moving averages, which indicates a possible further decline of the pair.

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

Bollinger Bands

In the case of growth, the upper limit of the indicator around 1.1600 will act as resistance.

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence – moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-profit speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to 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 the short and long positions of non-commercial traders.

The material has been provided by InstaForex Company – www.instaforex.com


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