On the hourly chart, the GBP/USD pair posted another decline on Tuesday, but this did not lead to the completion of the current upward wave. No new trading signals were generated either. Today, a rebound from the 61.8% Fibonacci retracement level at 1.3335 or consolidation above the 76.4% Fibonacci level at 1.3382 would favor the British pound and the resumption of the upward wave. A rebound from 1.3382 or consolidation below 1.3335 would suggest a continuation of the decline toward the 50.0% Fibonacci retracement level at 1.3298.
The wave structure shifted to a bullish outlook last week. The most recently completed downward wave broke below the previous low, while the new upward wave surpassed the previous peak and continues to develop. Therefore, the bulls have finally taken the initiative, although I had expected this to happen about two to three weeks earlier. It is now important for them to maintain their momentum. The pound has been rising quite rapidly, but further gains require supportive fundamental news.
The news backdrop was virtually nonexistent on Tuesday, while Wednesday began with renewed missile launches in the Middle East. Overnight, U.S. naval forces once again struck Iranian facilities near the Strait of Hormuz in response to Iranian attacks on commercial vessels attempting to pass through the strait. I will not speculate on which side is right or wrong this time. It is enough to say that negotiations between Tehran and Washington are once again at risk of collapsing. Moreover, even if Iran and the United States reach agreements on the nuclear program, the Strait of Hormuz, and various sanctions or reparations, what value would such an agreement have if both sides violate it the very next day? Over the past few months, Iran and the United States have agreed to ceasefires around ten times. What has that changed? Nothing. For the British pound, such a geopolitical backdrop is not supportive, but for now the market is ignoring the latest escalation in the Middle East. There will be no significant economic releases today, and only the FOMC meeting minutes, due later in the day, may have a modest impact on trader sentiment.
On the 4-hour chart, the GBP/USD pair rebounded from the 100.0% Fibonacci retracement level at 1.3159, reversed in favor of the British pound, and consolidated above the 61.8% Fibonacci level at 1.3348. Therefore, traders may expect further gains toward the next Fibonacci retracement level of 50.0% at 1.3409. Consolidation below 1.3348 would favor the U.S. dollar and signal a moderate decline toward the 76.4% Fibonacci retracement level at 1.3277. No developing divergences are currently observed.
Commitments of Traders (COT) Report
Sentiment among the Non-commercial group became less bearish during the latest reporting week but remains bearish overall. The number of Long positions held by speculative traders decreased by 3,623, while the number of Short positions declined by 7,195. The gap between Long and Short positions now stands at approximately 37,000 versus 139,000. Bears have dominated the market in recent months. However, while this dominance previously raised a few questions, the significantly changed news backdrop now makes it less clear-cut. The bears still hold an advantage of more than three to one.
I still do not believe in a sustained bearish trend for the British pound. However, in the near term, market direction will depend less on economic indicators, Trump's trade policy, or central bank monetary policy than on the duration, scale, and consequences of the conflict in the Middle East. In recent weeks, the market has shifted its expectations toward peace, but negotiations between Iran and the United States could prove lengthy and difficult. There is also no guarantee that they will end with the signing of a nuclear agreement.
Economic Calendar for the United States and the United Kingdom
United States
- FOMC Meeting Minutes (18:00 UTC)
The economic calendar for July 8 contains only one secondary event. As a result, the influence of the economic backdrop on market sentiment on Wednesday is expected to be minimal or absent.
GBP/USD Forecast and Trading Tips
Short positions may be considered today if the pair consolidates below 1.3335 on the hourly chart, with targets at 1.3298 and 1.3268, or after a rebound from 1.3382, targeting 1.3335 and 1.3298. Long positions may be considered after a rebound from 1.3335, with targets at 1.3382 and 1.3457, or after consolidation above 1.3382, with a target level of 1.3454–1.3457.
Fibonacci retracement grids are plotted from 1.3457 to 1.3139 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.
