06.05.202620:09 Forex Analysis & Reviews: GBP/USD: Smart Money Analysis – The British Pound May Continue to Rise

The GBP/USD pair has made another reversal in favor of the pound and is preparing to resume its upward movement. Recall that last week, the price reacted to another bullish imbalance (19), after which a new bullish imbalance (20) was formed, and today the pair also reacted to this pattern. Of course, without positive geopolitical developments—which further reduced the attractiveness of the US dollar—we would not have seen such strong growth. Nevertheless, traders had a clear and obvious area of interest, as well as a clear pattern within which a new buy signal was expected. As we can see, that signal has now formed. Until the end of the week, only geopolitics or unexpectedly strong US labor market and unemployment data could hinder the bulls' advance. In my view, geopolitics can turn against the bulls at any moment, so it is important to closely monitor all news related to negotiations between Iran and the United States. Official information remains extremely limited, but some reports appear convincing enough for the market to believe them. It is quite possible that the framework agreement, reportedly "to be signed in the coming days," may ultimately not materialize. Donald Trump has previously made statements that were later denied.

There is little more to add regarding the news background at this point. The situation surrounding the resolution of the Middle East conflict is slowly trying to improve, but traders remain uncertain about the direction of future developments. Today, sentiment shifted in favor of the bulls; tomorrow, it may shift toward the bears. For now, bulls retain the advantage, but a new escalation could quickly allow bears to launch a full-scale attack.

The pound's upward movement began with the "Three Drives Pattern." Thus, traders received a bullish signal at the very start of the move, and the overall trend remains bullish. At present, the ceasefire in the Middle East is quite fragile, but the parties involved appear to be making efforts to reach an agreement, according to media reports. Official negotiations may resume, but so could the conflict itself. The Strait of Hormuz remains under a dual blockade, yet Tehran and Washington seem to be moving toward lifting it. The situation is gradually improving, although this is based largely on unverified information. Markets are currently filled with optimism, but sentiment could reverse quickly if negative developments emerge.

The "Three Drives Pattern," marked on the chart with a triangle, enabled bulls to take the initiative. Imbalance 18 allowed traders to open long positions, and imbalance 19 provided another opportunity. Thus, three bullish signals have formed within the current impulse, and today a new bullish signal has appeared in imbalance 20. However, geopolitics has both enabled the bulls' advance and remains capable of quickly shifting in favor of the bears.

The economic news background on Wednesday was relatively weak. Yesterday, the US released ISM and JOLTS reports, and today the ADP report was published. These reports showed mixed results, and even if the market reacted, it did so only briefly. Yesterday, traders were waiting for geopolitical news and received none, resulting in low activity. Today, they did—and the pound surged.

In the United States, the overall information backdrop suggests that, in the long term, little supports a sustained rise in the US dollar. The conflict between Iran and the United States changes little in this regard. Geopolitics temporarily revived the dollar's safe-haven appeal, but the broader outlook remains challenging. The US labor market continues to weaken, the economy is approaching recession, and the Federal Reserve—unlike the ECB and the Bank of England—is not expected to tighten monetary policy in 2026. Additionally, several large-scale protests against Donald Trump have taken place across the country, and the potential departure of Jerome Powell could further weaken the dollar if the FOMC adopts a more dovish stance under Kevin Warsh. From an economic perspective, there are few reasons to expect sustained dollar strength.

Economic calendar for the US and the UK:

• US – Initial Jobless Claims (12:30 UTC)

On May 7, the economic calendar includes one notable entry. However, the overall impact of economic data on market sentiment on Thursday is expected to be limited. Markets remain focused on geopolitical developments.

GBP/USD forecast and trading advice:

The long-term outlook for the pound remains bullish. The "Three Drives Pattern" signaled the start of the upward movement, and since then three bullish patterns and signals have formed. Under current conditions, despite geopolitical risks, further gains in the pound are expected. However, geopolitics still poses a significant risk to this outlook. The target for GBP/USD is the 2026 high at 1.3867. The reaction to imbalance 20 has already provided traders with another opportunity to open long positions.