In my morning forecast, I drew attention to several rather interesting levels and recommended making decisions on entering the market. Let's look at the 5-minute chart and figure out what happened. The unsuccessful attempt of the bears to break below 1.2504 and the formation of a false breakdown there led to the formation of a buy signal with a fairly quick return to the nearest resistance of 1.2550, which brought about 40 points of profit. The active actions of sellers at this level did not take long to wait, and a false breakdown at 1.2550 led to an active sale of GBP/USD, allowing them to pick up about 40 more points. Unfortunately, the bulls failed to defend the 1.2504 level for the second time, although a good entry point into long positions was formed there. And what were the entry points for the euro this morning?

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

There is practically no chance for the British pound to recover. However, the US GDP report for the first quarter of 2022 must be in the afternoon. A sharp slowdown in growth is expected, but the main thing is that the indicator does not turn out to be worse than economists' forecasts, which will sharply weaken the position of the US dollar against the pound. If the initial results exceed forecasts, a further fall in the pound will be ensured. In this case, only the protection of the nearest support of 1.2450, 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 1.2514. It is hardly possible to expect a more abrupt upward jerk, but anything happens. The reaction to the GDP report can be anything, and it is unclear how traders are going to use it today. A breakdown of 1.2514 will lead to the demolition of bears' stop orders and will give a buy signal already to correct to the 1.2564 area, where the moving averages are. A similar consolidation above this level will lead to growth in the area of 1.2598, where I recommend fixing the profits. If the pound declines and there are no buyers at 1.2450, which is more likely, it is best to postpone purchases until the next support of 1.2386. I also advise you to enter the market there only if there is a false breakdown. It is possible to buy GBP/USD immediately for a rebound from the minimum of 1.22321, or even lower - in the area of 1.2256 and only with the aim of correction of 30-35 points within a day.

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

Bears control the market, which is obvious, since already in the first half of the day we saw an update of the annual lows. In the case of GBP/USD growth during the US session after weak US data, sellers will do everything to keep the pair above 1.2514. The formation of a false breakdown at this level will be an excellent sell signal to deploy a new large bearish trend for the pound. You can also count on the breakdown of the 1.2450 level, which we came close to at the time of writing the review. 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 1.2386 and 1.2321, where I recommend fixing the profits. A more distant target will be the 1.2256 area. In the scenario of GBP/USD growth and lack of activity at 1.2514, there is no need to panic much, although a sharp upward jerk may occur against the background of the demolition of stop orders. In this case, I advise you to postpone short positions to a larger resistance of 1.2564, from where the bears recently staged a good sale. I also advise you to open short positions there only in case of a false breakdown. It is possible to sell GBP/USD immediately for a rebound from 1.2598, 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 also 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 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 1.2565 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.