On the hourly chart, the GBP/USD pair continued to decline on Monday after consolidating below the 1.3596–1.3620 level and tested the support level of 1.3513–1.3539. A rebound from this zone today would favor the pound and lead to some growth toward the resistance level of 1.3596–1.3620. A breakout below 1.3513 would allow traders to expect a continued decline toward the support level of 1.3428–1.3437.
The wave structure remains bullish. The last completed upward wave broke above the previous peak, while the current downward wave has not yet broken the previous low. Geopolitics gave bears an almost complete advantage in the market for two months, after which the geopolitical backdrop supported bulls for about three weeks. At present, the situation in the Middle East is mixed but is shifting toward escalation and a prolonged confrontation between Iran and the United States. Bulls are likely to struggle to push higher in the coming weeks.
There was no significant news backdrop on Monday, but developments involving Donald Trump and Iran moved the market. A U.S. naval vessel attempted to pass through the Strait of Hormuz, and Tehran opened fire, striking the ship with two missiles. At this point, the truce can be considered effectively over. Just hours later, missiles were launched toward the United Arab Emirates, and in the evening, Donald Trump stated that Iran's act of aggression would not go unanswered. According to U.S. media reports, Israel and the United States may soon carry out retaliatory strikes against Iranian infrastructure. At the same time, Trump again stated that negotiations with Tehran are ongoing and even described them as "optimistic." However, like many other traders, I now focus on actions rather than words. In practice, the truce has already been broken, and negotiations continue to stall. According to U.S. media, Iran submitted a new proposal to Washington, but it was rejected. No real progress in the talks is evident. As a result, the U.S. dollar could unexpectedly strengthen significantly this week. While the parties to the conflict may realize that a new war would benefit no one, without successful negotiations, the conflict will persist regardless.
On the 4-hour chart, the pair has broken above a descending trend channel, suggesting the potential formation of a full-fledged bullish trend. A move above the 38.2% Fibonacci level at 1.3540 would allow for further growth toward the 23.6% retracement level at 1.3664. However, the hourly chart currently provides a clearer picture, so it is advisable to monitor it more closely. No emerging divergences are observed at this time.
Commitments of Traders (COT) Report:
The sentiment among non-commercial traders became more bearish over the latest reporting week. The number of long positions held by speculators decreased by 3,509, while short positions increased by 5,091. The current ratio of long to short positions stands at approximately 59,000 versus 120,000. For six consecutive weeks, non-commercial traders have been actively increasing short positions and reducing long positions, creating a significant imbalance. In recent months, bears have dominated the market, which comes as no surprise given the geopolitical backdrop.
I still do not fully believe in a sustained bearish trend for the pound, but everything now depends not on economic data, Trump's trade policy, or central bank monetary policy, but on the duration, scale, and consequences of the conflict in the Middle East. In recent weeks, the market had shifted toward expectations of de-escalation, but the latest news suggests that a lasting truce remains far off and that the conflict could reignite at any moment. In that case, the bears' advantage could become even stronger.
Economic Calendar (U.S. and UK):
U.S.: ISM Services PMI (14:00 UTC)
U.S.: JOLTS Job Openings (14:00 UTC)
U.S.: New Home Sales (14:00 UTC)
On May 5, the economic calendar includes three releases, with the ISM index being the most significant. The impact of the news flow on market sentiment may become noticeable in the second half of the day.
GBP/USD Forecast and Trading Tips:
Selling the pair is possible today if it consolidates below the 1.3513–1.3539 level on the hourly chart, with a target of 1.3428–1.3437. Buying opportunities may arise if the price rebounds from the 1.3513–1.3539 level, targeting 1.3596–1.3620.
Fibonacci levels are drawn from 1.3866 to 1.3158 on the hourly chart and from 1.3012 to 1.3868 on the 4-hour chart.
