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

Sellers tried to pull down the pound in the first half of the day, and even formed a good signal there to open short positions. The fundamental reports on the UK economy, which indicated its weakness, did not make it possible for buyers to go beyond the resistance of 1.2966, which led to forming a false breakout with a convenient entry point for short positions. I marked this moment on the 5-minute chart. However, the bulls regained the initiative closer to the US session. Unfortunately, according to my system, it was not possible to wait for a convenient entry point into long positions from the 1.2966 level, and so we missed the entire upward movement to 1.3027. Selling on the rebound from 1.3027 did not lead to anything good.

No major changes in the futures market. Bears are in control of the situation, and the horizontal channel, which is where that pair was last week, did not lead to any special changes in the balance of power. Factors like uncertainty about Brexit and the prospects for the recovery of the British economy, as well as the risk of introducing negative interest rates by the Bank of England, will continue to restrain demand for the pound and put pressure on it. Do not forget about the risk of the spread of the second wave of coronavirus. The Commitment of Traders (COT) report for October 6 showed a minimal increase in short non-commercial positions from 51,961 to 51,996. Long non-commercial positions slightly rose from 39,216 to 40,698. As a result, non-commercial net position remained negative and reached -11,298 against -12,745, which indicates that sellers of the pound retain control and also shows their slight advantage in the current situation.

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

Sellers need to defend resistance at 1.3045, where a false breakout will be your signal to open short positions in the hope of regaining the bear market. However, a more important task is to settle below support at 1.2991, where the moving averages also pass, since this will return the initiative to the bears and lead to forming a larger movement to the 1.2925 area, where I recommend taking profit. In case the pound grows above resistance at 1.3045, especially in the absence of important fundamental data, it is better not to rush to sell, as the market may continue to implement Friday's bullish momentum. Most likely, the bears will resort to protecting resistance at 1.3106, or you can sell GBP/USD immediately on a rebound from the 1.3178 high, counting on a correction of 30-40 points within the day.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the pound's growth in the short term.

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 classic daily moving averages on the D1 daily chart.

Bollinger Bands

Growth will be limited by the upper level of the indicator in the 1.3075 area. In case the pound falls, support will be provided by the lower border at 1.2930.

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.