On the hourly chart, GBP/USD posted a sharp decline on Monday toward the 50.0% Fibonacci retracement level at 1.3408, rebounded from that level, and returned to the resistance level at 1.3454–1.3466. Consolidation above this zone would allow traders to anticipate a continuation of the upward move toward the next resistance level at 1.3526–1.3539. A rebound from the resistance zone would favor the US dollar and trigger a new decline toward 1.3408.
The wave structure remains bearish, as bulls still lack sufficient positive geopolitical developments to launch a sustained advance. The latest completed upward wave failed to break above the previous peak, while the latest downward wave failed to break below the previous low. Geopolitical developments have recently provided support for bulls; however, the prospects for reaching an agreement between Iran and the United States are once again fading. The bearish trend can be considered complete only after a break above the May 25 high.
Monday's news flow once again put pressure on both bulls and bears. Before bears had time to fully react to the positive ISM Manufacturing PMI report from the United States or Tehran's statement regarding the suspension of negotiations with Washington and the possibility of blocking the Bab el-Mandeb Strait, Donald Trump announced that the war between Lebanon and Israel was being called off, signaling a willingness to continue negotiations with Tehran. In my view, Trump made concessions because a renewed war would represent an extreme scenario for the White House—one that it is trying to avoid at all costs. As a result, the British pound plunged at a rapid pace yesterday, while today the US dollar is declining just as quickly. The geopolitical backdrop continues to shift several times a day, forcing traders to alternate between buying and selling without a clear medium-term strategy. At present, trading decisions depend almost entirely on geopolitical developments, which can change within a matter of hours. The pair may rise today, but Tehran could issue another statement announcing the suspension of negotiations. If that happens, the dollar is likely to strengthen again. Under current conditions, making forecasts beyond the next few hours is simply too risky.
On the 4-hour chart, GBP/USD has returned to the resistance level at 1.3482–1.3514. Another rebound from this area would once again favor the US dollar and lead to a moderate decline toward the 23.6% Fibonacci retracement level at 1.3327. However, price movements in the near term will depend primarily on geopolitical developments rather than technical analysis. Technical analysis should be viewed only as a supplementary tool. No emerging divergences are currently observed on any indicator.
Commitments of Traders (COT) Report:
Sentiment among the Non-commercial category became slightly less bearish during the latest reporting week. The number of Long positions held by speculators decreased by 10,097, while the number of Short positions declined by 13,006. The gap between Long and Short positions currently stands at approximately 58,000 versus 119,000. Bears have dominated the market in recent months, which is hardly surprising given the geopolitical situation in the Middle East and the political crisis in the United Kingdom. The bearish advantage currently exceeds a two-to-one ratio.
I still do not believe in a sustained 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 the expectation of a prolonged conflict. However, recent developments suggest that a ceasefire may still be achievable, although the process is unlikely to be quick or straightforward.
Economic Calendar for the United States and the United Kingdom:
- United States – JOLTS Job Openings (14:00 UTC).
The economic calendar for June 2 contains only one event that can be considered of moderate importance. The economic backdrop may influence market sentiment during the second half of the day.
GBP/USD Forecast and Trading Tips:
Short positions may be considered today if the pair rebounds from the 1.3454–1.3466 resistance level on the hourly chart, with targets at 1.3408 and 1.3349–1.3355. Long positions were possible following a rebound from 1.3408, targeting 1.3454–1.3466. The target has been reached. New long positions may be considered after a close above the 1.3454–1.3466 level, with a target at 1.3526–1.3539.
Fibonacci retracement grids are drawn from 1.3158 to 1.3655 on the hourly chart and from 1.3866 to 1.3158 on the 4-hour chart.
