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On the hourly chart, the GBP/USD pair consolidated below the 1.3513–1.3526 level on Wednesday, but as of Thursday morning it remains within this range. Therefore, a close below this zone today would allow traders to expect a continuation of the decline toward the next support level at 1.3428–1.3437. A close above the zone would suggest some upward movement toward the 61.8% corrective level at 1.3596.
The wave structure remains bullish. The latest completed upward wave exceeded the previous peak by only a few pips, while the latest downward wave broke the previous low by only a few points as well, within sideways trading conditions. Geopolitics provided the bears with an almost complete advantage in the market for two months, but the geopolitical backdrop later shifted and now supports the bulls to a greater extent. At present, the truce between Iran and the United States continues, but the situation is moving toward escalation and prolonged confrontation. Bulls are likely to face difficulties launching strong attacks in the coming weeks.
The news background on Wednesday once again favored the bears, as there were no positive developments from the Middle East, while inflation in the United States continues to accelerate. Let me remind you that rising inflation is negative for the economy, but at the same time it forces the central bank to adopt hawkish policies, which positively affects the national currency.
In addition, the United Kingdom released its first-quarter GDP report today. At first glance, the data appeared fairly positive, showing growth of 0.6% quarter-over-quarter and 1.1% year-over-year. However, annual indicators have been steadily declining for five consecutive quarters. Industrial production data was even weaker, once again falling by 0.2%. Although traders' expectations were even more pessimistic, I see nothing positive in declining production volumes.
What is currently supporting the British pound is the fact that threats of strikes from Iran and the United States have not escalated further. The market continues to focus closely on geopolitics, while economic developments remain secondary. Therefore, there are still chances for the bullish trend to continue, while the pound continues trading sideways.
On the 4-hour chart, the pair consolidated above the descending trend channel, which suggests the possibility of a full-fledged bullish trend. A rebound from the support level at 1.3482–1.3514 would allow traders to expect new bullish attacks toward the 1.3597 and 1.3700 levels. The chart pattern on the hourly timeframe is currently more informative, so I recommend paying closer attention to it. No emerging divergences are observed today.
Commitments of Traders (COT) Report:
The sentiment among the "Non-commercial" category of traders became more bearish during the latest reporting week. The number of long positions held by speculators increased by 2,996, while short positions rose by 6,265. The gap between long and short positions now effectively stands at 62,000 versus 126,000. For six consecutive weeks in February and March, non-commercial traders actively increased short positions and reduced longs, which led to a significant imbalance between long and short positions. In recent months, bears have dominated, which comes as no surprise given the geopolitical backdrop.
I still do not believe in a long-term bearish trend for the pound, but everything now depends not on economic indicators, Trump's trade policy, or central bank monetary policy, but on the duration, scale, and consequences of the war in the Middle East. In recent weeks, the market had shifted toward expectations of de-escalation, but the latest news suggests that a full ceasefire remains far away, and the conflict could resume at any moment. In that case, the bears' advantage could become even stronger.
Economic Calendar for the U.S. and the United Kingdom:
The economic calendar for May 14 contains four events, the most important of which have already been released to the market. The influence of the economic background on market sentiment during the remainder of the day is expected to be weak.
GBP/USD Forecast and Trading Tips:
Selling opportunities were available after a rebound from the 1.3632–1.3641 level on the hourly chart, targeting the 1.3513–1.3526 level. The target has been reached. New sell positions may be considered after a close below the 1.3513–1.3526 level, targeting 1.3428–1.3437.
Buy positions may be considered after a rebound from the 1.3513–1.3526 level, targeting 1.3632–1.3641.
The Fibonacci grids are based on 1.3866–1.3158 on both the hourly and 4-hour charts.
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