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

Several rather interesting signals to enter the market were formed yesterday. Let's take a look at the 5-minute chart and analyze all the entry points. Even in my forecast yesterday for the first half of the day, I drew attention to the level 1.4108 and talked about its importance for the continuation of the bullish scenario. It can be seen how the bears again make an unsuccessful attempt to break below this level in the first half of the day, which leads to the formation of a signal to open long positions in the continuation of the bullish scenario. Good data on UK GDP, which contracted less in the 1st quarter than expected, and industrial production, which jumped much stronger than economists' forecasts, led to the growth of the pound in the morning from the level of 1.4108 by about 40 points after the formation of an entry point in long positions. Then, the attention of investors was focused on the data on inflation in the United States. The fall of the pound, which occurred immediately after the release of the report, was quickly recovered and then the test of the level 1.4108 took place from top to bottom, which led to the formation of an excellent entry point for long positions. However, we did not see any significant growth, and after a bounce up by 25 points, the bears achieved a breakdown of this range. Here, it was necessary to act in the opposite direction: the test of the level 1.4108 from the bottom up led to the formation of a good entry point in short positions, after which the pound fell to its target in the support area of 1.4062, which brought about 40 points of profit.

The bears have taken control of the market and today buyers need to work very hard to reverse the new trend. The first half of the day promises to be rather calm, as important fundamental statistics on the UK are not expected, and the Governor of the Bank of England Andrew Bailey is expected to make a speech only during the American session. All the bulls need is the formation of a false breakout at the level of 1.4048, which generates a signal to open long positions in the expectation of an upward correction to the resistance area of 1.4102, where I recommend taking profits. There are moving averages that limit the upward potential of the pair and it will not be so easy to break above this level. In case of a breakout and a test of the level 1.4102 from top to bottom, you can safely open new long positions in the continuation of the upward correction with the aim of updating the maximum of 1.4160, where I recommend taking profits. The next big resistance is at 1.4201 area. If the bulls are not active in the support area of 1.4048, it is best not to rush into purchases. The optimal scenario would be long positions immediately to rebound from the minimum of 1.4013, or even lower - from the level of 1.3970, counting on an upward correction of 25-30 points within the day.

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

Bears are targeting the next support level 1.4048, which limited the pair's downside potential yesterday in the afternoon. Therefore, the entire focus of the pound sellers this morning will be at this level. The next speech of the Governor of the Bank of England Andrew Bailey is expected today, however, he is unlikely to say anything interesting. In this light, we can count on a breakout and consolidation below the level of 1.4048 with a reverse test of it from the bottom up, which will lead to the formation of a good entry point to short positions, counting on a further fall in GBP/USD along a new trend to the area of 1.4013. A further target will be the level 1.3970, where I recommend taking profits. If we see a rise in the pound during the European session, the best option for opening short positions would be the formation of a false breakdown in the resistance area of 1.4102. If bears are not active there, it is best to postpone short positions until a larger local high in the 1.4160 area recovers, counting on a downward correction of 20-25 points within the day.

Commitment of Traders (COT) report for May 4 recorded a reduction in long positions and an increase in short ones. However, the data does not take into account Friday's market changes, when the British pound showed a large increase. Last week, we all followed the decision of the Bank of England on interest rates, so traders feared for further growth of the pound, building up short positions. Keeping monetary policy unchanged limited the upward potential of the pound, but hints from the committee members that it is time to think about curtailing stimulus programs breathed new strength into the buyers of the pound. Disappointing data on the US labor market will continue to put pressure on the US dollar for a long time at any opportunity. Therefore, the trend towards strengthening the British pound will continue. The prospect of a recovery in the UK economy in the summer, when all quarantine restrictions will be lifted, also causes a lot of optimism and helps the buyers of the pound find excuses to build up their positions. The COT report indicated that long non-commercial positions declined from 59,917 to 52,262. At the same time, short non-commercial positions increased from 30,699 to 32,414, causing the non-commercial net position to decline to 19,848 versus 29,218 a week earlier. But the closing price of the last week rose to the level of 1.39033 against 1.38947.

Indicator signals:

Moving averages

Trading is carried out below 30 and 50 moving averages, which indicates a further decline in the pair 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 the classic daily moving averages on the daily D1 chart.

Bollinger Bands

The fall will be limited by the lower level of the indicator in the area of 1.4010. Growth will be limited by the upper level of the indicator in the area of 1.4140.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing volatility and noise). Period 30. It is marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands Period 20
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who 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.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• The total non-commercial net position is the difference between short and long positions of non-commercial traders.