The GBP/USD pair began to rise after sweeping liquidity below the latest bearish swing and gained a total of 260 points. A bullish Order Block and bullish Imbalance 31 formed, shifting the technical picture to a bullish one. The news background supported the bulls last week, but the bullish momentum has now stalled as the price encountered bearish Imbalance 29. The chart clearly shows the price reaction to this pattern, which triggered a corrective pullback. The targets for this pullback are two new bullish patterns that are also visible on the chart.

The pound was expected to decline to 1.3300, and the price fell to 1.3271. A resumption of the pound's advance is expected once the corrective pullback is complete. Bullish Imbalance 31 has now been tested, and the price may react to it and form a bullish signal. Next week, the Bank of England may tighten monetary policy, which would support bullish traders, provided they have not relinquished control by then. The Fed is not expected to tighten policy again in October, and traders have already priced in a December rate hike. Therefore, the bulls could resume their advance as early as today.

An important factor for the pound's outlook is that traders expect three rounds of monetary policy tightening from the Bank of England, compared with only one or, at most, two from the Fed. The dot plot also indicates one further policy tightening, while the latest FOMC minutes confirmed that most central bank officials expect only one rate hike. Of course, it is impossible to know how events will unfold in 2027, but that is the current consensus forecast, weighted by the available projections. Consequently, the Bank of England could ultimately raise rates more aggressively than the Fed in the coming months, which would clearly not support further gains in the US dollar. The dollar has already benefited fully from expectations of Fed tightening, and the market may now begin to price in tighter monetary policy from the Bank of England. Geopolitical developments are currently the only factor supporting the dollar.

Had the Fed not raised interest rates in September and signaled its readiness to continue tightening monetary policy, a decline in the US dollar would have been expected a month ago. That remains the outlook. The pair has reversed in favor of the pound, and the next step is for bullish signals to form, providing opportunities for bulls to open long positions. The pound's long-term outlook remains bullish.

Do the bears have further downward potential? The scope appears limited. Over the past six to eight weeks, the bears seem to have achieved the seemingly impossible by pushing the dollar to levels that are unusually high by recent standards. It is worth remembering that the market has had reasons to buy the dollar recently, but there have also been reasons for the pound to rise that traders have simply overlooked. As a result, a reversal may now begin, with the resulting move being more consistent with the underlying fundamentals than the preceding decline.

There was no significant economic news on Wednesday, but the FOMC decision and Kevin Warsh's remarks are still ahead. Like many traders, no commitment from Warsh to raise rates in December is expected. Nevertheless, that is precisely what the market is anticipating. If the expectation has already been priced in, it has largely been reflected in the exchange rate. Therefore, even hawkish rhetoric from the FOMC chair should not necessarily trigger another dollar rally. This is especially true given that GBP/USD currently has two strong support zones.

The overall fundamental backdrop remains such that, over the long term, a decline in the US dollar is the only scenario that appears likely. The conflict between Iran and the United States has not changed this outlook. Geopolitical tensions reminded the market of the dollar's safe-haven status for several months, but the conflict has already passed its most acute phase. The future direction of FOMC monetary policy remains uncertain, while the market continues to anticipate tightening as its primary scenario. This is the main factor supporting bearish sentiment toward the pound. However, traders continue to overlook the prospect of monetary policy tightening by the Bank of England. Inflation in the UK is rising, as it is across much of the world, leaving the Bank of England with few alternatives to raising interest rates as well.

Economic Calendar for the US and the UK:

• United States — Advance estimate of third-quarter GDP growth (12:30 UTC).
• United States — Core PCE price index (12:30 UTC).
• United States — Personal income and spending (12:30 UTC).
• United States — Change in initial jobless claims (12:30 UTC).

On October 29, the economic calendar contains four releases, with the GDP report being the most significant. Economic data could influence market sentiment on Thursday afternoon.

GBP/USD Forecast and Trading Tips:

The long-term outlook for the pound remains bullish. Bears have controlled the market in recent weeks, but the broader range, clearly visible on the daily chart, remains intact. The liquidity sweep below the swing low from May 1 triggered a decline within the horizontal range. However, liquidity was also swept below the June lows, allowing the bulls to regain control. Therefore, the short-term technical picture is now considered bullish.

For traders, this means that the near-term strategy should be to maintain existing long positions or look for new buying opportunities. Such opportunities could emerge as early as today or later this week within the Order Block or Imbalance 31. The pound's target is near the upper boundary of the range at 1.3670.