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14.10.202108:37 Forex Analysis & Reviews: GBP/USD: plan for the European session on October 14. COT reports. Strong growth for the pound expected in the near future

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

A fairly large number of signals to enter the market were formed yesterday. Let's take a look at the 5 minute chart and break down all the entry points. During yesterday's European session, it is clear how two attempts to break above 1.3634 lead to forming false breakouts and a signal to open short positions. The pound fell by 40 points to the support area of 1.3593 after the US inflation report was published, where a false breakout and a signal to open long positions were immediately formed. As a result, an increase of 40 points. In the afternoon, the bulls quickly regained control of the resistance at 1.3634, and its top-down test formed an excellent entry point for long positions, which brought about another 25 points in profit.

Exchange Rates 14.10.2021 analysis

Today we have representatives from the Bank of England, which may increase the demand for the British pound, if they express a more firm position on tightening monetary policy. Since important fundamental reports will not be released today, I advise you to bet on the GBP/USD pair's succeeding growth. Bulls are now entirely focused on the 1.3674 level. A reverse test of this range from top to bottom generates a buy signal for GBP/USD, which will push the pair to new highs of 1.3714 and 1.3748. A similar breakdown of these ranges will form additional entry points for buying the pound, which will lead to a larger upward movement to the 1.3803 area, where I recommend taking profits. If the bulls are not active in the first half of the day, a downward correction to the support area of 1.3632 is not excluded. There are moving averages, playing on the side of the pound bulls. Forming a false breakout creates a good entry point into long positions. Otherwise, the optimal buying scenario will be a test of the next support at 1.3589, formed at the end of yesterday. I advise you to watch long positions of GBP/USD immediately for a rebound but only from a low like 1.3546, counting on an upward correction of 25-30 points within the day.

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

The bears tried to win the market over to their side yesterday after the US inflation report was published, but judging by what is happening, bulls are clearly stronger. Most likely, the bears will focus on protecting the 1.3674 level today, around which active trading is now being conducted. If we see an unsuccessful attempt to consolidate above this range during the speech of a member of the Bank of England's Monetary Policy Committee Silvana Tenreyro, as well as the formation of a false breakout there, similar to what I discussed above, this will lead to the formation of a signal to open short positions with the expectation that the pair would fall. The bears' next task is to regain control over the support level of 1.3632, which will be much more difficult, since there are moving averages playing on the side of the bulls. A breakthrough of this area and its reverse test from the bottom up will form a signal to open short positions based on the test of 1.3589 and then to renew the low in the 1.3546 area, where I recommend taking profits. In case the pound recovers further and we observe an absence of those willing to sell at 1.3674, and everything goes exactly to this - the formation of a false breakout in the area of the next resistance at 1.37140 will be a signal to open short positions in GBP/USD. I advise you to sell the pound immediately on a rebound from a larger resistance at 1.3748, or even higher - from a high of 1.3803, counting on the pair's rebound down by 20-25 points within the day.

Exchange Rates 14.10.2021 analysis

I recommend for review:

The Commitment of Traders (COT) report for October 5 revealed a sharp increase in short positions and a reduction in long positions, which led to a shift in the negative zone of the overall net position. Despite the rather active recovery of the pair a week earlier, it was not possible to continue the bullish trend for the pound. Although all the prerequisites for this were there. The data showed that supply chain problems in the UK remain high enough to push prices upward. It is unlikely that such a development of the situation will force the Bank of England to stand on the sidelines for a long time and watch the inflation spiral unfolding. The minutes of the meeting of the British central bank, which was published a week earlier, indicated that changes in monetary policy could be adopted as early as November this year. Therefore, the only problem that stands in the way of the pound bulls is the US Federal Reserve, which, although not going to raise interest rates, is also heading towards tightening monetary policy. Despite all this, I advise you to buy the pound in case of significant corrections, as the trading instrument is expected to grow in the medium term. The COT report indicated that long non-commercial positions fell from 57,923 to 48,137, while short non-commercials jumped from 55,959 to 68,155, leading to a partial build-up of bears' advantage over the bulls. As a result, the non-commercial net position returned to negative territory and dropped from the 1964 level to the -20018 level. By the results of the week, the closing price of GBP/USD dropped to 1.3606 against 1.3700.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the formation of a new bullish scenario.

Moving averages

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 upper border of the indicator in the area of 1.3685 will lead to a new wave of growth of the pound. In case the pair falls, support will be provided by the lower border at 1.3600.

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 market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Miroslaw Bawulski,
Analytical expert of InstaForex
© 2007-2021
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