On the hourly chart, the GBP/USD pair continued its upward movement on Friday and managed to consolidate above the resistance level of 1.3454–1.3466 on Monday morning. Therefore, the pound may continue rising at the beginning of the week toward the next resistance level at 1.3526–1.3539. A close below the 1.3454–1.3466 level would bring bears back into the market, allowing them to target the 1.3408 level and the support level at 1.3349–1.3355.
The wave structure remains bearish, as bulls still lack sufficiently positive geopolitical developments for a full-scale advance. The last completed downward wave broke below the previous low, while the new upward wave has not yet exceeded the previous peak. Geopolitical developments have recently begun supporting bulls, as a memorandum of understanding between Iran and the United States could be signed in the near future, while the ceasefire remains in effect and may be extended indefinitely as negotiations on a final settlement continue.
Friday's news background once again favored bears, yet bulls remained on the offensive. The entire previous week unfolded under bullish pressure despite fairly weak economic data from the United Kingdom. In particular, the unemployment rate rose to 5% in March, while inflation slowed to 2.8%. Both reports provided bears with grounds for renewed selling pressure. On Friday, the UK retail sales report also disappointed, but traders largely ignored it as increasingly optimistic news regarding the conflict in the Middle East began to emerge.
Overall, similar reports were released throughout the previous week, but the market remained highly cautious toward every headline suggesting a possible end to the conflict and the signing of an agreement. Unfortunately, such information has appeared repeatedly in recent months, yet no actual agreement has materialized. Even after Donald Trump's statements over the weekend, I would not be confident about full mutual understanding between Iran and the United States. The U.S. president himself stated on Saturday that the probability of renewed military action in the Middle East remains fairly high. However, Trump believes that an agreement will ultimately be signed and that further strikes on Iran will not be necessary. Washington is reportedly prepared to make concessions to Tehran by partially lifting oil sanctions and partially unfreezing Iranian foreign accounts. Both sides have also agreed to reopen the Strait of Hormuz in the near future, provided negotiations do not collapse once again before then.
On the 4-hour chart, the GBP/USD pair rebounded from the 23.6% Fibonacci retracement level at 1.3327 and continued rising toward the resistance level at 1.3482–1.3514. A rebound from this zone would allow for expectations of a moderate decline. However, market movements this week will depend primarily on geopolitical developments rather than chart analysis. Technical analysis should therefore be viewed only as a supplementary tool. No emerging divergences are currently observed on any indicator.
Commitments of Traders (COT) Report:
The sentiment among the "Non-commercial" category of traders became more bearish again during the latest reporting week. The number of Long positions held by speculators decreased by 11,530, while the number of Short positions increased by 9,718. The gap between Long and Short positions now effectively stands at 68,000 versus 132,000. Bears have dominated the market in recent months, which comes as little surprise given the geopolitical situation in the Middle East and the political crisis in the United Kingdom. Bears currently maintain more than a twofold advantage.
I still do not believe in a long-term bearish trend for the pound, but in the near term everything will depend not on economic indicators, Trump's trade policy, or central bank monetary policy, but rather on the duration, scale, and consequences of the conflict in the Middle East. In recent weeks, the market had adjusted to expectations of a prolonged conflict, but recent developments suggest that a ceasefire may still be achieved, although the process is unlikely to be easy or quick.
Economic Calendar for the United States and the United Kingdom:
The economic calendar for May 25 contains no significant events. Therefore, the impact of macroeconomic data on market sentiment on Monday is expected to be absent.
GBP/USD Forecast and Trading Tips:
Short positions may be considered today if the pair closes below the 1.3454–1.3466 level on the hourly chart, with targets at 1.3408 and 1.3349–1.3355. Long positions became possible following a close above the 1.3454–1.3466 level, with a target at 1.3526–1.3539. These long positions may still be held today.
Fibonacci retracement levels are plotted from 1.3158 to 1.3655 on the hourly chart and from 1.3866 to 1.3158 on the 4-hour chart.
