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

Several signals to enter the market were formed yesterday. Let's look at the 5-minute chart and analyze all the entry points: I paid attention to the 1.3892 level in my morning forecast and recommended making a decision based on it. After a slight downward correction in this range in the first half of the day, the bulls achieved a false breakout there, where I recommended opening long positions in the morning. As a result, the upward movement was about 35 points, which is quite good for intraday trading. Closer to lunchtime, the bears returned the pair back to the 1.3892 level and managed to go over it. In this scenario, all you had to do was to wait for a reverse test of the 1.3892 level from the bottom up, which happened in the middle of the US session. However, to my regret, a major downward movement for the pound did not take place.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. There are some significant changes there, although this did not affect the balance of power in any way. The Commitment of Traders (COT) reports for April 20 showed an increase in both long and short positions, while the total non-commercial net position remained almost unchanged, as it only slightly decreased from the previous value. The growth in positions indicates that players are returning to the market as they hope that the pound would rise further. However, such high prices are very attractive for the bears, therefore, a sharp increase in short positions was also recorded.

Good fundamental data, which was released last week on the UK economy, once again proves a rather high probability of strong economic growth rates in the second quarter of this year. This will further contribute to the pound's growth in the medium term, so I recommend betting that it would further strengthen against the US dollar. It is important how the market will react to the fundamental reports on the American economy this week, as well as to the Federal Reserve's decision on interest rates - this will be the main one for the pound's succeeding movement along the trend, or for a downward correction. The COT report revealed that long non-commercial positions rose from 52,851 to 61,053. At the same time, short non-commercial positions increased from 27,261 to 35,875, resulting in a non-commercial net position only slightly declining to 25,178, versus 25,590 a week earlier. On the other hand, the closing price jumped to 1.3991 against 1.3753 last week, which indicates an upward potential for the pair.

Today we await the report on retail sales from the Confederation of British Industry. A good report could help the pound regain its positions and control over the 1.3892 level, which was not accomplished yesterday afternoon. However, it is necessary to act with extreme caution, since it is far from clear where the trend will proceed, especially if the 1.3892 level turned out to be too tough for the bulls. A return and test of this range from top to bottom can make it possible for you to build up long positions, which generates a signal to buy the pound, counting on the pair to rise to a high like 1.3944. The next target will be the 1.4000 area, where I recommend taking profits. If the pound is under pressure in the first half of the day, and traders are not pleased with the report, then I recommend not to rush into long positions: the best scenario would be to test a large support at 1.3838, which was formed last Friday. From this level, you can buy the pound immediately on a rebound, counting on a correction of 20-25 points within the day. The next big support is seen around 1.3792.

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

The initial task in the first half of the day is to protect resistance at 1.3892. You can only think about selling the pound while expecting a succeeding correction to the support area of 1.3838 after the UK retail sales report has been released, as quite a lot depends on it today. A breakthrough and consolidation below this range with a reverse test from the bottom up can create another entry point for short positions with an exit to the 1.3792 low, where I recommend taking profits. In case the pair grows above resistance at 1.3891 in the first half of the day and good data on retail sales, which are expected as the British economy recovers: then I recommend holding back from short positions until a new local high near 1.3944 has been tested, where you can sell the pound in case of a false breakout. I advise you to only consider selling GBP/USD immediately on a rebound after the renewal of the monthly resistance in the 1.4000 area.

Indicator signals:

Moving averages

Trading is carried out in the area of 30 and 50 moving averages, which indicates market uncertainty regarding the succeeding direction.

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

Surpassing the upper border of the indicator in the area of 1.3915 will lead to a new wave of growth for the pound. Surpassing the lower border at 1.3870 will lead to a new wave of decline for the pair.

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.