In my morning forecast, I paid attention to the 1.2590 level and recommended making decisions on entering the market from it. Let's look at the 5-minute chart and figure out what happened. A slight upward movement of the pound to the resistance area of 1.2590, together with a false breakdown - all this led to the formation of another sell signal in the continuation of the downtrend. As a result, the pair collapsed by more than 60 points, but just a couple of points were not enough to reach the target support level. For this reason, I did not get entry points into long positions in the opposite direction. In the afternoon, the technical picture for the pound has completely changed. And what were the entry points for the euro this morning?

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

Despite the successful attempt of the bulls to buy off the annual lows, the pressure on the pound remains and will remain high for quite a long time. In the second half of the day, we are waiting for statistics on the American economy, which will be on the side of dollar buyers, which will only increase pressure on GBP/USD and lead to a repeated attempt to consolidate at annual lows. Only the protection of the nearest support of 1.2557, formed at the end of the first half of the day, as well as the formation of a false breakdown on it, will give a signal to open long positions against the trend in the expectation of an upward correction to the area of 1.2630. It is hardly possible to expect a sharper upward jerk, but anything happens. If the data on the balance of foreign trade in goods, changes in the volume of stocks in wholesale warehouses, and changes in the volume of pending home sales in the United States greatly disappoint traders, we can expect a breakdown of 1.2630, where the moving averages are just playing on the sellers' side. Fixing higher with a reverse test from top to bottom will come to the demolition of the bears' stop orders and will give a buy signal already with the aim of correction to the area of 1.2684, where I recommend fixing the profits. In the case of a decline in the pound and the absence of buyers at 1.2557, it is best to postpone purchases until the next support of 1.2484. I also advise you to enter the market there only if there is a false breakdown. You can buy GBP/USD immediately for a rebound from the minimum of 1.2440, or even lower - in the area of 1.2386 and only for a correction of 30-35 points within a day.

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

Bears control the market. Having achieved the next update of the weekly minimum, they confirmed the continuation of the downward trend, so there is not much to worry about yet. In the case of GBP/USD growth in the afternoon, sellers will do everything to keep the pair above 1.2630, especially in the case of good statistics on the American economy. The formation of a false breakout at 1.2630 will be an excellent sell signal to deploy a new large bearish trend for the pound. You can also count on a repeated update of 1.2557. A breakthrough and a reverse test from the bottom up of this range will lead to the formation of an additional sell signal that can collapse the pound to new annual lows in the areas of 1.2484 and 1.2440, where I recommend fixing the profits. A more distant target will be the 1.2386 area. Under the scenario of GBP/USD growth and lack of activity at 1.2630, nothing terrible will happen. However, I advise you to postpone short positions to a larger resistance of 1.2684, from where the bears recently staged a good sale yesterday. I also advise you to open short positions there only in case of a false breakdown. You can sell GBP/USD immediately for a rebound from 1.2728, counting on the pair's rebound down by 30-35 points within a day.

The COT report (Commitment of Traders) for April 19 recorded an increase in both short and long positions, but the former turned out to be much larger, which is obvious if you look at the GBP/USD chart. Things are very bad in the UK economy, which was confirmed last week by the Governor of the Bank of England, Andrew Bailey. His statements that the economy is heading towards recession were the last straw holding back the sellers of the pound in the second half of April. As a result, the breakdown of the finished minimum and a new major sale of the pound have already driven the trading instrument below the 26th figure, and it seems that this is not the end. The growth of the consumer price index is steadily moving towards double-digit indicators, and the increasingly complicated situation in the world due to supply chain disruptions against the background of a new wave of COVID-19 in China creates even more problems. The situation will only worsen, as future inflation risks are now quite difficult to assess due to the difficult geopolitical situation, but the consumer price index will continue to grow in the coming months. The situation in the UK labor market, where employers are forced to fight for every employee by offering higher and 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 System. Already during the May meeting, the committee may announce an increase in interest rates by 0.75% at once, they do not have such problems with the economy as in the UK yet. The COT report for April 19 indicated that long non-commercial positions rose from the level of 35,514 to the level of 36,811, while short non-commercial positions jumped from the level of 88,568 to the level of 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 decreased from 1.3022 to 1.2997.

Signals of indicators:

Moving averages

Trading is below 30 and 50 daily moving averages, which indicates a bear market for the pound.

Note. The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger Bands

In the case of growth, the upper limit of the indicator around 1.2630 will act as resistance.

Description of indicators

• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
• MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-profit speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to 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 the short and long positions of non-commercial traders.