In my morning article, I turned your attention to 1.2413 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. A decline and a false breakout of this level gave a buy signal, which led to an increase in the pound sterling by more than 60 pips. In the afternoon, the technical outlook was revised slightly.

When to open long positions on GBP/USD:

The UK Manufacturing PMI Index tipped expectations. Bulls managed to protect 1.2413, boosting bullish bias. The pound sterling reached new weekly highs. Fed officials are scheduled to make speeches in the afternoon, including Patrick T. Harker. He stressed the need for a pause in the monetary tightening. The US ISM Manufacturing Index is on tap today. If the figure declines, it will put even more pressure on the US dollar as well as a drop in ADPs.

I would recommend traders not to open long positions at the current levels. It is better to enter the market after a downward correction from the support of 1.2449. A false breakout there may lead to a buy signal and a new rise to the resistance level of 1.2489. A breakout and a downward retest of this level will provide an additional entry point into long positions and facilitate the bullish sentiment. The pair could grow to 1.2516. A more distant target will be the 1.2543 level where I recommend locking in profits. If the pound sterling falls to 1.2449 and bulls show no activity, I would advise you to postpone long positions until a false breakout of 1.2414. At this level, the moving averages are passing in positive territory. You could buy GBP/USD immediately at a bounce from the monthly low of 1.2382, keeping in mind an upward intraday correction of 30-35 pips.

When to open short positions on GBP/USD:

Sellers tried to regain control of the market but large traders immediately took advantage of the situation. In the afternoon, only the positive ISM Manufacturing Index and ADP could help the bears. If these figures are downbeat, the pound sterling will continue the correction, which is about to move into a new uptrend. For this reason, I would advise you to postpone short positions until the retest and a false breakout of the resistance level of 1.2489. Bears are likely to take control, giving a sell signal with a downward movement to the support level of 1.2449 – the level that acted as resistance in the morning. A breakout and an upward retest of this level will boost the bear market, providing new entry points into short positions with a fall to 1.2414. A more distant target will be the monthly low of 1.2382 where I recommend locking in profits.

If GBP/USD rises and bears fil to protect 1.2489 in the afternoon, sellers will have to close Stop Loss orders, which will lead to a larger upward correction of the pair. In this case, I would advise you to postpone short positions until a false breakout of the resistance level of 1.2516. I will sell. You could sell GBP/USD at a bounce from 1.2543, keeping in mind a downward intraday correction of 30-35 pips.

COT report

According to the COT report for May 23, there was a drop in long and short positions. Last week, the British currency kept falling. Judging by a decrease in both long and short positions, the sentiment remained the same. Uncertainty over the US debt ceiling deal and recession fears forced traders to close positions. The BoE also did not provide any clues about its plans for monetary policy. The regulator stressed that a pause in the tightening cycle is unlikely as inflation remains high. The latest COT report showed that short non-commercial positions decreased by 7,181 to 57,614, while long non-commercial positions fell by 8,185 to 69,203. This led to a decline in the non-commercial net position to 11,059 against 12,593 a week earlier. The weekly price amounted to 1.2425 against 1.2495.

Indicators' signals:

Trading is carried out above the 30 and 50 daily moving averages, which indicates a further upward movement.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

If GBP/USD declines, the indicator's lower border at 1.2400 will serve as support.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.