GBP/USD: plan for the European session on November 17. COT reports. Bulls not ready to give up the market

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

Like the bears yesterday, they did not try to pick up support at 1.3172. The pair kept returning to this level every time this range was tested, which ultimately led to producing a signal to buy the pound. I marked a long entry point on the 5-minute chart, afterwards the bears could no longer do anything. There is still a strong demand for the British pound today in the Asian session, which indicates a fairly large investor interest in this instrument.

But, before we analyze the technical picture of the pound and run to take long deals, let's see what happened in the futures market last week, which continues to signal the increase in sellers. Lack of clarity on the trade agreement, together with the lockdown of the British economy in November, clearly does not add optimism and confidence to the buyers of the pound. There is also the risk of imposing negative interest rates early next year, especially if the coronavirus situation continues to worsen. This is reflected in the sentiment of market participants. The Commitment of Traders (COT) report for November 3 showed a reduction in long positions and a slight increase in short positions. Long non-commercial positions fell from 31,799 to 27,701. At the same time, short non-commercial positions slightly rose from 38,459 to 38,928. As a result, the negative non-commercial net position was 11,227 against 6,660 a week earlier, which indicates that the sellers of the British pound retain control and also shows their minimal advantage in the current situation.

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Buyers of the British pound aim for a breakout and to get the pair to settle above the resistance of 1.3237 in the first half of the day, which was not done yesterday. Only this produces a new entry point into long positions in hopes for GBP/USD to continue rising and reach a high of 1.3310, where I recommend taking profits. The next target will be resistance at 1.3378, but it will require good reasons for its update. One of them could come from Bank of England Governor Andrew Bailey's speech today, who may allay fears related to the negative interest rate, which is planned to be introduced early next year. In case the pound falls in the first half of the day, protecting support at 1.3168 will be an equally important task for the bulls. They got it over with yesterday. Today, forming a false breakout in that area will stop the bears. This will provide buyers with confidence and bring GBP/USD back to the resistance area of 1.3237, which is currently being traded around. In case bulls are not active in the 1.3168 area, it is best not to rush and postpone long positions until the test of a new low at 1.3106, where you can buy the pound immediately on a rebound, counting on a correction of 20-30 points within the day.

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

The bears have taken a wait-and-see attitude and the main focus is currently on protecting resistance at 1.3237. Sellers' behavior at this level will determine the pair's succeeding direction. If buyers are not active, forming a false breakout in the 1.3237 area will be the first signal to open short positions in the pound, counting on it to fall to support 1.3168, which is now the middle of the horizontal channel. We can say that the bears have taken control of the market only when they have settled below 1.3168, which will quickly pull down the pound to the lower border of this channel at 1.3106. Only its breakout will indicate the resumption of the bearish trend, which could pull down the pound to new lows of 1.3034 and 1.2976, where I recommend taking profits. In case bears are not active at 1.3237, it is best to postpone short positions until the test of the monthly high of 1.3310, or sell the pound immediately upon a rebound from resistance 1.3378, counting on a correction of 20-30 points within the day.

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Indicator signals:

Moving averages

Trading is carried out just above the 30 and 50 moving averages, which indicates a slight advantage for the buyers 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 breakout of the upper border of the indicator in the 1.3235 area will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the lower border of the indicator at 1.3170.

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.
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