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The GBP/USD pair is approaching the key level of 1.3400 against the backdrop of a weakening U.S. dollar; however, fundamental factors suggest a cautious approach before opening positions for further gains.
The statement from the Iranian army regarding the end of attacks on Israel, accompanied by a warning of possible retaliatory actions in the event of new strikes on Lebanon, as well as the confirmation of the cessation of hostilities from Israeli Prime Minister Benjamin Netanyahu, who promised a firm response to future threats, has put pressure on the U.S. dollar. As a result, the American currency retreated from two-month highs, providing moderate support to the GBP/USD pair.
At the same time, ongoing disagreements between the U.S. and Iran over key issues, including the nuclear program and control of the Strait of Hormuz, limit improvement in market sentiment. Combined with hawkish expectations regarding the Federal Reserve's future policies, this helps curb the dollar's decline. Currently, the market assesses the probability of a Fed interest rate hike by the end of the year at more than 70% against the backdrop of persistent inflation risks, which supports demand for the dollar and limits the growth potential of GBP/USD.
Additional pressure on the British pound stems from domestic political uncertainty: UK Prime Minister Keir Starmer's position has weakened following the resignation of several junior ministers. This may discourage market participants from actively increasing long positions in the pound.
Under such conditions, it makes sense to wait for a more convincing buying continuation before discussing the formation of a short-term bottom for the GBP/USD pair. The main focus should still be on upcoming U.S. inflation data and the publication of the monthly UK GDP, which could set the further direction of movement.
From a technical perspective, bulls need to overcome all moving averages for complete strength, but initial resistance is at the round level of 1.3400, followed by the 200-day SMA and the 20-day SMA. The pair found support at the round level of 1.3300. Oscillators are negative, confirming weakness in bulls and an advantage for bears in the market.
According to recent data, the U.S. dollar demonstrated the most significant strengthening this week against the Swiss franc.
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