In my morning forecast, I highlighted the 1.3545 level and planned to make trading decisions based on it. Let's look at the 5-minute chart and see what happened. A decline followed by a false breakout at that level led to a buy entry for the pound, resulting in a 30-point rise, though the move didn't extend further. The technical picture was revised for the second half of the day.

To Open Long Positions on GBP/USD:

Mediocre U.K. data didn't significantly help the pound's rise—nor was it expected to. Now, attention shifts to more impactful U.S. economic statistics, including consumer confidence and durable goods orders. Also, keep an eye on Federal Reserve speakers.

In case of further downside in the pound—though that seems unlikely—I would prefer to act around the new support at 1.3510. A false breakout at that level would offer a good entry point for long positions, aiming to recover toward 1.3549, which recently acted as support. A breakout followed by a retest from above would create another opportunity to go long, with the goal of retesting 1.3586, the monthly high, reinforcing the bullish market. The final target would be 1.3612, where I plan to take profits.

If GBP/USD declines and bulls fail to show activity at 1.3510 in the second half of the day, pressure on the pound may intensify. In this case, only a false breakout near 1.3474 would justify entering long positions. I also plan to buy on a direct bounce from 1.3437, aiming for a 30–35 point intraday correction.

To Open Short Positions on GBP/USD:

Sellers have stepped in, but so far this remains just a correction within a strong bullish market, so bears have little to celebrate. I plan to act only in the event of a GBP/USD upward spike. A false breakout near the 1.3549 resistance, where the moving averages are located, would provide a signal to enter short positions, targeting a move down to 1.3510. A breakout and retest from below would trigger stops and open the way toward 1.3474. The final target would be 1.3437, where I plan to take profits.

If demand for the pound returns later in the day and bears fail to act near 1.3549, it's best to delay selling until a test of the 1.3586 resistance. I will open short positions there only on a false breakout. If no downward move occurs at that level either, I'll look for shorts on a rebound from 1.3612, targeting a 30–35 point downward correction.

COT Report (Commitment of Traders) – May 20:

The report showed a decrease in long positions and a rise in short positions. Following the U.K.–U.S. trade deal, demand for the pound remains fairly strong, even despite expectations of rate cuts by the Bank of England. Similar plans from the Federal Reserve are affecting the dollar's strength, allowing the pound to continue rising.

There is no major upcoming U.K. economic data, meaning large players have fewer reasons to sell the pound than to buy it.

According to the latest COT report, long non-commercial positions fell by 1,396, to 88,144. Short non-commercial positions rose by 1,827, to 64,151. The gap between longs and shorts narrowed by 381.

Indicator Signals:

Moving Averages Trading is currently below the 30- and 50-period moving averages, which indicates possible weakness in the pound.

Note: The author uses H1 (hourly) chart settings for moving averages, which differ from the classic daily (D1) definitions.

Bollinger Bands If the pair declines, the lower band near 1.3530 will act as support.

Indicator Descriptions:

• Moving Average (MA): Identifies the current trend by smoothing volatility and noise.
  • 50-period MA is marked in yellow
  • 30-period MA is marked in green
• MACD (Moving Average Convergence/Divergence):
  • Fast EMA – period 12
  • Slow EMA – period 26
  • Signal line (SMA) – period 9
• Bollinger Bands: Measures price volatility. Period – 20
• Non-commercial traders: Speculators such as individual traders, hedge funds, and large institutions who meet specific criteria and use the futures market for speculative purposes.
• Long non-commercial positions: Total open long positions held by non-commercial traders.
• Short non-commercial positions: Total open short positions held by non-commercial traders.
• Net non-commercial position: The difference between non-commercial short and long positions.