12.05.202604:30 Forex Analysis & Reviews: GBP/USD Overview. May 12. The British Pound is Ready for a Surge at Any Moment

The GBP/USD currency pair also traded quite calmly on Monday. At the market open, the pair lost about 80 pips (more than the EUR/USD pair), but it had another reason for the drop. Over the weekend, both the US and Iran once again violated the ceasefire, firing at each other, and another round of negotiations ended in failure. Additionally, Keir Starmer's party suffered a heavy defeat in local elections, with the Labour Party losing several hundred seats in local councils. Thus, there is renewed discussion in Britain about the possibility of the Prime Minister's resignation. Interestingly, can any UK Prime Minister complete their term in the coming years?

However, we do not consider the defeat of the Labour and Conservative parties to be significant news. Britain has been in a political crisis for over a decade, as evidenced by the constant resignations of Prime Ministers and just ministers. A few years ago, the British pound would have undoubtedly entered a new downward trend; however, the currency market is currently dominated by Donald Trump, who is doing everything possible to ensure the US dollar continues to weaken. Naturally, Trump initiates wars, imposes tariffs and sanctions, enacts contradictory laws, and so on—not to cause the dollar to depreciate. But the leader of the White House likely finds it gratifying that each of his decisions leads to a decline in the value of the national currency.

Trump continues to see the primary issue of the country's negative trade balance as the excessively strong dollar. The more expensive the dollar, the lower the demand for American goods abroad. One cannot deny the logic behind the US President's thinking. The dollar indeed rose for 15-16 years against the euro, pound, and many other currencies worldwide. This cycle can now be considered complete, and for the past four years, a new cycle of dollar depreciation has been ongoing. Thus, the US dollar will decline quickly or slowly, in any case, not just for technical reasons. Trump's policies drastically diminish foreign interest in the American economy; the economy itself is slowing down, the leader of the White House has turned half the world's countries against him, and he has enough time to alienate the other half by the end of his presidency. Therefore, in the next three years, the US dollar has no other path except downward to the ocean floor, to SpongeBob.

As for the more short-term outlook, it is also quite grim for the US dollar. In February and March, geopolitics supported the dollar, but the market quickly absorbed that factor, and now even a renewed war in the Middle East will not lead to a new dollar trend. Of course, Trump may start another five wars in 2026. Why not? According to him, he finished eight wars in 2025, so starting a few more is feasible... However, all these actions will merely postpone the new decline of the US dollar. Currently, the British pound is just 260 pips away from its four-year high, even though the conflict in the Middle East is far from completely resolved.

The average volatility of the GBP/USD pair over the last 5 trading days is 90 pips, which is considered "average" for the pound/dollar pair. On Tuesday, May 12, we expect movement within the range between 1.3553 and 1.3733. The upper channel of the linear regression has turned upward, indicating a recovery of the upward trend. The CCI indicator has not generated signals recently.

Nearest Support Levels:

S1 – 1.3611

S2 – 1.3550

S3 – 1.3489

Nearest Resistance Levels:

R1 – 1.3672

R2 – 1.3733

R3 – 1.3794

Trading Recommendations:

The GBP/USD currency pair continues its recovery after two months of geopolitical uncertainty. Trump's policies will continue to put pressure on the US economy, so we do not expect the US currency to grow in 2026. Therefore, long positions with a target of 1.3916 and above remain relevant when the price is above the moving average. If the price is below the moving average line, short positions can be considered with targets at 1.3489 and 1.3428 on technical grounds. In recent weeks, the British currency has recovered, and the geopolitical factor is losing its influence on the market.

Explanations for the Illustrations:

• Linear Regression Channels help identify the current trend. If both are pointing in the same direction, it indicates a strong trend.
• The Moving Average Line (settings 20,0, smoothed) indicates the short-term trend and the direction in which trading should currently proceed.
• Murray Levels serve as target levels for movements and corrections.
• Volatility Levels (red lines) indicate the likely price channel in which the pair will trade over the coming days, based on current volatility metrics.
• CCI Indicator: Its entry into the oversold area (below -250) or the overbought area (above +250) signifies that a trend reversal in the opposite direction is approaching.