28.05.202621:05 Forex Analysis & Reviews: GBP/USD – Smart Money Analysis: The Pound Remains Under Pressure

Last week, the GBP/USD pair declined into bullish imbalance 18, reacted to this pattern, formed a Bullish Engulfing candlestick formation, returned to bearish imbalance 19, and has since continued trading within this pattern without attempting to leave it. No reaction followed from imbalance 19, which means the technical picture continues to support the bullish advance. The appreciation of the British currency over the past week and a half was driven by growing market optimism regarding the possibility of a framework agreement between Iran and the United States. However, this week, the chances of reaching an agreement in the near term have sharply declined again, while the risks of a prolonged conflict and failed negotiations have increased significantly. Thus, the bears have once again received short-term support, which could eventually become long-term support given the latest developments from the Middle East and the United Kingdom.

Tomorrow, Bank of England Governor Andrew Bailey is scheduled to speak, and this is not only the most interesting event of the day but effectively the only significant one. The market will look for signals regarding the possible decision of the Bank of England at its next meeting. For many traders, it is already obvious that further monetary tightening is unlikely, as the Consumer Price Index slowed to 2.8% in April. However, the head of the British regulator may indicate whether markets should expect tighter policy later in 2026 and what the central bank's inflation forecasts for 2026 currently are. Following the April inflation report, some analysts concluded that the slowdown may have been temporary. If that proves to be the case and inflation resumes accelerating, the Bank of England could raise rates later.

The situation surrounding the resolution of the Middle East conflict is gradually improving, but traders still fear that the balance could once again shift toward escalation. In fact, it did not take long for that to happen. This week, the United States launched two additional missile strikes against Iranian facilities, while Iran responded with a strike on a US military base in Kuwait. It remains to be hoped that negotiations will not collapse after these events and that the agreement — which the parties reportedly already agreed upon — will not be canceled. So far this week, only pessimistic headlines have emerged.

In my view, the trend remains bullish despite the pair's sharp declines earlier this year. At the moment, the ceasefire in the Middle East remains fragile, but it is still holding and could even be extended for at least another 60 days if Tehran and Washington sign a framework agreement. However, the Strait of Hormuz remains under a dual blockade, the nuclear issue has not been resolved, and any assessment of progress in negotiations relies almost entirely on statements from Donald Trump. The situation continues to shift between positive and negative developments. At present, the market still believes an agreement is possible, but confidence is not unlimited, and the latest developments in the Strait of Hormuz may at the very least complicate further negotiations.

The technical picture is currently as follows. Bullish imbalance 18 triggered a market reaction, while bearish imbalance 19 is likely to be invalidated. Therefore, the technical setup fully supports further appreciation of the pound. The only thing left is to monitor geopolitical developments closely in order to exit long positions in time if negotiations once again reach a deadlock and the framework agreement remains only "95% agreed."

The economic background on Thursday was present but failed to attract traders' attention. US economic reports cannot be described as secondary, but the market remains fully focused on geopolitics and reacts almost exclusively to it.

In the United States, the broader fundamental backdrop still suggests that, in the long term, little can be expected other than further dollar weakness. Even the conflict between Iran and the United States changes little in this regard. Geopolitical tensions temporarily reminded markets of the dollar's safe-haven status for approximately two months, but overall, the long-term outlook for the US dollar remains difficult. The US labor market continues to weaken, the economy is moving closer to recession, and the Federal Reserve lacks the conditions necessary for further monetary tightening in 2026. In addition, four major protest movements against Donald Trump have already taken place across the United States, while the eventual departure of Jerome Powell could further worsen the situation for the dollar if the FOMC under Kevin Warsh adopts a more dovish stance. From a purely economic perspective, I currently see no fundamental reasons supporting long-term dollar appreciation.

News Calendar for the United States and the United Kingdom:

• United Kingdom – Speech by Bank of England Governor Andrew Bailey (08:20 UTC).

The economic calendar for May 29 contains only one event that can be considered important. However, everything will depend on what the Bank of England Governor says. The economic backdrop may influence market sentiment on Friday.

GBP/USD Forecast and Trading Tips:

For the British pound, the long-term outlook remains bullish. The Three Drives Pattern warned traders about the beginning of the upward movement, and since then, three bullish patterns and three bullish signals have been formed, all of which traders could have used. Two weeks ago, geopolitical developments complicated the bulls' previously optimistic outlook, but they still managed to retain control and formed a new bullish signal within imbalance 18. If geopolitical developments remain positive, growth is likely to continue. I consider the 2026 high at 1.3867 to be the main target for the pound, while the nearest target is 1.3656. At the moment, there are no grounds for considering a bearish trend. The only bearish imbalance is close to invalidation. For obvious reasons, bearish patterns cannot form during a bullish market movement.