07.05.202604:23 Forex Analysis & Reviews: GBP/USD Overview. May 7: The US and Iran Agree to Continue Negotiating

The GBP/USD currency pair also resumed its upward movement on Wednesday. The decline of the US dollar was, as one might guess, caused by geopolitical factors. Specifically, another wave of unverified and unofficial news emerged regarding de-escalation in the Middle East. Among the official statements, US Secretary of State Marco Rubio mentioned that the active phase of the military operation in Iran has concluded. However, Donald Trump stated two weeks ago that there had been a complete victory over Iran and that all objectives had been achieved. So why continue the war if the goals have been met?

Market reactions were primarily driven by two significant factors. First, Washington deemed it unnecessary to respond to Iran's missile attack on its destroyer. This event clearly indicates who needs a deal and an end to the war more. Second, reports surfaced claiming that Tehran and Washington might soon sign... no, not a peace agreement or a nuclear deal, but a "memorandum of understanding." We understand that this refers to an official document at the highest diplomatic level that will affect the lives of millions in the Middle East. But do you not smile when you read "memorandum of understanding"?

Essentially, this memorandum is intended to demonstrate both sides' willingness to achieve long-term peace. In fact, this memorandum is a pact to continue negotiations. Of course, this is far better than a new escalation, but we would hold off on popping the champagne regarding a ceasefire in the Middle East. Brent crude oil sharply declined on Wednesday's trading, but everyone knows that tomorrow Iran could launch another attack on Israel or the UAE, or Trump could issue new demands to Tehran, and the Strait of Hormuz would remain blocked while hostilities resume. A more "fragile" peace is hard to imagine.

Nevertheless, demand for the US dollar has decreased again, as expected. Not only because Iran and the US are awkwardly approaching a potential deal whose details are still unknown. The geopolitical factor has faded into the background for the past few weeks. What growth factors remain for the US dollar? Without the war in the Middle East, we would have never seen the GBP/USD pair decline by 700 points in February-March. Trump is determined to continue the trade war in one form or another; the Federal Reserve may begin adopting a more dovish stance starting May 15, the US economy is slowing down, the "golden age" has yet to arrive, national protests against Trump are sporadically occurring in America, inflation is rising, the labor market is shrinking, unemployment is increasing, and Trump himself needs a weak dollar. On what basis is the dollar expected to rise if even the geopolitical factor has "ended"? As before, we anticipate only a decline in the US currency in 2026.

The average volatility of the GBP/USD pair over the last five trading days is 103 pips. For the GBP/USD pair, this figure is considered "average." Therefore, on Thursday, May 7, we expect movements within a range bounded by levels 1.3479 and 1.3685. The upper linear regression channel has flattened, indicating a change in the trend to an upward one. The CCI indicator has entered overbought territory and formed a "bearish" divergence, warning of a downward correction that has already been completed.

Nearest Support Levels:

S1 – 1.3550

S2 – 1.3489

S3 – 1.3428

Nearest Resistance Levels:

R1 – 1.3611

R2 – 1.3672

R3 – 1.3733

Trading Recommendations:

The GBP/USD currency pair is recovering after two months of geopolitical concerns. Trump's policies will continue to exert 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 1.3479 based on technical analysis. In recent weeks, the British currency has recovered, and the influence of geopolitical factors on the market is diminishing.

Explanations for the Illustrations:

• Linear regression channels help determine the current trend. If both are pointing in the same direction, it indicates a strong trend.
• The moving average line (settings 20,0, smoothed) determines the short-term trend and the direction in which trading should be conducted.
• Murray levels – target levels for movements and corrections.
• Volatility levels (red lines) – indicate the probable price channel in which the pair will spend the upcoming day, based on current volatility metrics.
• CCI Indicator – its entry into the overbought (above +250) or oversold (below -250) areas signals that a trend reversal is approaching in the opposite direction.