10.07.202603:47 Forex Analysis & Reviews: GBP/USD Review. July 10. The Pound Sterling Restores Fairness

The GBP/USD currency pair rose again on Thursday, despite no grounds for the move. Interestingly, during the period when the pound was falling every day, nearly all experts were proclaiming a political crisis, a hawkish stance from the Federal Reserve regarding monetary policy, the weakness of the British economy, and uncertain economic prospects. Now, however, everyone is silent. The pound has been rising for two weeks, rising 270 pips and completely offsetting the previous wave of decline. Yet, for some reason, no one discusses why the pound is rising when, just recently, everyone was predicting its fall.

We mentioned two weeks ago that there were no grounds for the US dollar to grow. The idea that the Fed will raise the key interest rate once or twice by the end of the year is merely speculation. Let's remember that in March, the same dot plot indicated a loosening of monetary policy by the end of the year. Thus, the dot plot could shift again by September, and the market may rush to adjust expectations that may well not materialize. Currently, the market bases its assumptions on US inflation, which has risen from 2.4% to 4.2% over the last three months. However, this inflation level could be entirely different by September. Oil prices have decreased, and unless Donald Trump seriously intends to renew the war with Iran, they are unlikely to rise above $100 per barrel again. Consequently, price pressures are expected to ease. If, in September, the Fed sees inflation at 3%, what would be the point in raising the key rate?

Moreover, the US labor market has started to face problems again. In the second half of last year, the labor market was the main reason for a 0.75% rate cut. Therefore, it would be unwise to believe that the labor market does not matter now. It certainly does. If it is shrinking and convulsing, the Fed will think twice before making a "hawkish" decision. Kevin Warsh may openly promise the market to raise rates or to reduce inflation by any means possible. However, one call from the White House could reverse the Fed chairman's opinion. Of course, decisions are not made solely by Warsh, but he does have some influence over other FOMC members.

On the weekly timeframe, the GBP/USD pair has been trading in a flat for nearly a year. Since there are no foundations (other than geopolitical ones) for the US dollar to rise under Donald Trump, we expect the flat to end and the upward trend that began in 2022 to resume. In the coming weeks, we anticipate a rise to at least the level of 1.3650, as the British pound recently dropped to the lower part of the weekly flat channel. Therefore, we are looking forward to movement towards the upper boundary of the channel.

The average volatility of the GBP/USD pair over the last 5 trading days, as of July 10, is 62 pips, which is characterized as "average." Thus, we expect the pair to move within the range limited by levels 1.3340 and 1.3464 on Friday. The upper channel of linear regression is directed downward, indicating a bearish trend. The CCI indicator has entered the oversold area twice and formed two bullish divergences, suggesting a potential end to the downward trend.

Nearest support levels:

S1 – 1.3367

S2 – 1.3306

S3 – 1.3245

Nearest resistance levels:

R1 – 1.3428

R2 – 1.3489

R3 – 1.3550

Trading Recommendations:

The GBP/USD currency pair maintains a downward trend, presumed to be a correction within the larger upward trend on daily or weekly timeframes. The overall fundamental backdrop for the dollar remains negative, but in 2026, geopolitical tensions followed by the Fed's willingness to raise the key interest rate have provided substantial support for the American currency. When the price is below the moving average, short positions can be considered with targets of 1.1353 and 1.1292. Above the moving average line, long positions are relevant with targets of 1.3428 and 1.3464. Bears are currently exceptionally strong for no visible reason.

Explanations for Illustrations:

• Linear regression channels help determine the current trend. If both are directed the same way, it indicates a strong trend.
• The moving average line (settings 20,0, smoothed) determines the short-term trend and direction in which trading should be conducted;
• Murray levels are target levels for movements and corrections;
• Volatility levels (red lines) represent the probable price channel within which the pair will move in the coming day, based on current volatility statistics;
• The CCI indicator entering the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.