Imagining something is thinking. It is in the mind. Pretending is your imagination in a kore physical form. You are acting out what you are imagining. If you are just daydreaming, you are imagining. You're just thinking. Maybe you are imagining you are a warrior or a Jedi. If you got some toy lightsabers and had a lightsaber fight, you are pretending. It is using your imagination but you're bringing your imagination to life. Or your imagination becomes external. An actor will use their imagination and then they will pretend on camera. A writer will use their imagination and then the actor will read the script and pretend. But an author of a book will only be using his imagination.

I think both could be use, although there could be a slightly difference depending on context. “Imagine” means you are using your imagination, meaning in your mind you start to have thoughts about being a horse... perhaps you can imagine what it feels to be a horse... “Pretend” means you are not only using your imagination, but also almost acting on it. When you pretend, you act like something you are not.