Yesterday, several profitable market entry signals were formed. Let's take a look at the 5-minute chart and see what happened. In my morning forecast, I paid attention to the level of 1.2308 and advised you to make a decision on entering the market from it. The decline and a false breakout at 1.2308 resulted in forming several excellent signals to buy the pound at once, as a result of which the pair rose by more than 70 points and rested on the resistance of 1.2377. Forming a false breakout there in the afternoon resulted in a great entry point for short positions and a 40 point selloff.

When to go long on GBP/USD:

Pound bulls are doing their best to protect the next annual low and find the bottom. The lack of statistics on the UK is good for them, as there is no extra reason to build up short positions on risky assets. Now the bulls have a very important task to keep the pair above 1.2328. The longer the trading is carried out above this range, the more likely the pound will move up sharply. Large players can accumulate their positions around 1.2328, which makes this level quite a promising support. Forming a false breakout at 1.2328 will result in creating the first entry point into long positions, counting on the return of the pound to the upper border of the horizontal channel at 1.2398. A breakthrough of this range is entirely dependent on the removal of a number of bearish stop orders, counting on the pound's succeeding downward movement.

The bears' lack of activity at 1.2398, as well as a test of this level from top to bottom will provide an entry point into long positions with the goal of a sharper breakthrough to the area of 1.2444, where I recommend taking profits. A breakthrough of this range is possible only in case we receive mediocre speeches from the Federal Reserve representatives in the afternoon, which will open the way to 1.2505. In case the pair falls and the lack of activity of the bulls at 1.2328, and such a scenario is more possible - given the wait-and-see position of the Bank of England, I advise you not to rush into buying. You can open long positions only in the area of 1.2261 and if a false breakout is formed. I advise you to buy GBP/USD immediately on a rebound only in the area of 1.2185, or even lower - around 1.2122, based on an upward correction of 25-30 points within the day.

When to go short on EUR/USD:

The bears' main goal for today is a breakthrough of the nearest support at 1.2328, which is the middle of the horizontal channel formed at the end of last week. The divergence on the MACD indicator has been won back, so there are no more technical reasons for a further pause. There is also no fundamental reason to be happy for the pound. A breakthrough and reverse test of 1.2328 from below forms a sell signal, which will quickly push the GBP/USD to the 1.2261 area - a new major support level. A breakdown of this range also forms an additional sell signal with the prospect of reaching a low like 1.2185, where I recommend taking profits.

The 1.2122 area will be a more distant target, but the opportunity to update it will appear only in case the Fed representatives make very hawkish statements in the afternoon. With the GBP/USD growth scenario, the bears will try to do everything to prevent the exit above the resistance of 1.2398. A breakthrough of this range will strengthen the upward correction and lead to removing a number of stop orders. Therefore, forming a false breakout there will be a signal to sell in order to continue the bear market. If there is no activity around 1.2398, I advise you to postpone short positions until the next major resistance at 1.2444. I also advise you to open short positions there only in case of a false breakout. It is possible to sell GBP/USD immediately for a rebound from the high of 1.2505, counting on the pair's rebound down by 30-35 points within the day.

COT report:

The Commitment of Traders (COT) report for April 19 showed that both short and long positions have increased, but there were much more of the former, which is obvious if you look at the GBP/USD chart. The UK economy is in very bad shape, as Bank of England Governor Andrew Bailey confirmed last week. His statements that the economy is heading into recession were the last straw holding back pound bears in the second half of April. As a result, surpassing the annual low and a new major sell-off of the pound has already driven the trading instrument below the 26th figure, and it seems that this is not the end. The consumer price index is climbing steadily into double digits, and a worsening global situation due to disruptions to supply chains amid a new wave of Covid-19 in China creates even more problems. The situation will only get worse, as future inflationary risks are now quite difficult to assess also due to the difficult geopolitical situation, but it is clear that the consumer price index will continue to rise in the coming months. The situation in the UK labor market, where employers are forced to fight for each employee, offering ever higher wages, is also pushing inflation higher and higher. The pressure on the pound is also growing for another reason - the aggressive policy of the Federal Reserve. The Committee may announce an increase in interest rates immediately by 0.75% during the May meeting - they do not have such problems as in the UK with the economy yet. The April 19 COT report indicated that long non-commercial positions rose from 35,514 to 36,811, while short non-commercial positions jumped from 88,568 to 95,727. This led to an increase in the negative value of the non-commercial net position from - 53,054 to -58,268. The weekly closing price fell from 1.3022 to 1.2997.

Indicator signals:

Trading is above the 30 and 50-day moving averages, which indicates an attempt by the bulls to regain the market.

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

In case of growth, the upper border of the indicator around 1.2390 will act as resistance. In case of a decline, the lower border of the indicator around 1.2295 will act as support.

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.