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On the hourly chart, the GBP/USD pair continued its decline on Wednesday after rebounding from the 1.3454–1.3466 level, and today it consolidated below the 50.0% Fibonacci level at 1.3408. A rebound from this level would allow traders to expect another decline toward the 1.3349–1.3355 support level. Consolidation above the 1.3408 level would favor the British pound and support some growth toward the 1.3454–1.3466 level.
The wave structure remains bearish, as bulls still lack positive geopolitical developments for a full-scale offensive. The latest completed downward wave broke below the previous low, while the latest upward wave has not yet exceeded the previous peak. Geopolitical developments have recently supported the bulls; however, the chances of reaching an agreement between Iran and the United States are once again fading rapidly, while the parties have resumed military actions in the region.
The news background on Wednesday was relatively neutral, as there were few significant reports during the day. However, overnight into Thursday, Donald Trump stated that Iran and Oman were conducting secret negotiations aimed at establishing full control over the Strait of Hormuz. According to the White House, Oman and Iran intend to jointly manage the strait, which would make its safe and free passage impossible for commercial vessels. Trump stated that the strait must remain open to all parties, while Oman could face severe sanctions from Washington if it continues engaging in behind-the-scenes negotiations. Trump also did not rule out strikes on Omani territory if Oman forms a coalition with Iran regarding the Strait of Hormuz.
Thus, the situation in the Middle East continues to become increasingly tense day by day, although earlier this week traders had expected a ceasefire, a deal, and the reopening of the Strait of Hormuz. Once again, market participants can see that 90% of the optimistic information does not correspond to reality. There are still no agreements or deals between the United States and Iran, as Iranian officials regularly remind the media.
On the 4-hour chart, the GBP/USD pair rebounded from the 1.3482–1.3514 resistance level, reversed in favor of the US dollar, and began declining toward the 23.6% corrective level at 1.3327. However, price movements in the near term will depend on geopolitics rather than chart analysis. Technical analysis can only be used as a supplementary tool. No emerging divergences are currently observed on any indicator.
Commitments of Traders (COT) Report:
The sentiment among the Non-commercial category of traders became more bearish again during the latest reporting week. The number of Long positions held by speculators decreased by 11,530, while the number of Short positions increased by 9,718. The gap between Long and Short positions now effectively stands at 68,000 versus 132,000. Bears have dominated in recent months, which raises little doubt given the geopolitical tensions in the Middle East and the political crisis in the United Kingdom. The advantage of the bears is now more than twofold.
I still do not believe in a long-term bearish trend for the British pound, but in the near future everything will depend not on economic indicators, Trump's trade policy, or central bank monetary policy, but rather on the duration, scale, and consequences of the war in the Middle East. In recent weeks, the market has adjusted to expectations of a prolonged conflict, but recent news suggests that a ceasefire may still be reached, although it is unlikely to be quick or easy.
News Calendar for the United States and the United Kingdom:
The economic calendar for May 28 contains three entries, but none are likely to attract strong market attention, as traders continue focusing primarily on geopolitics. The influence of the economic background on market sentiment on Thursday is expected to be weak or absent.
GBP/USD Forecast and Trading Tips:
Selling opportunities were possible after a close below the 1.3454–1.3466 level on the hourly chart, with targets at 1.3408 and 1.3349–1.3355. These positions may still be held today. Buying opportunities are possible after consolidation above the 1.3408 level, with a target at 1.3454–1.3466.
Fibonacci levels are constructed from 1.3158–1.3655 on the hourly chart and from 1.3866–1.3158 on the 4-hour chart.
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