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The GBP/USD pair spent four full days in decline. As a result of this drop, bears reached the support zone of imbalance 18, which is a bullish pattern. Thus, if no new negative developments for the pound emerge this week, the bearish attack may end here. I would like to remind that last week there were enough reasons for selling the pound, but I still believe bears extracted the maximum possible move. In addition to the renewed escalation in relations between the US and Iran, the party of Keir Starmer suffered a decisive defeat in elections in the UK, US inflation accelerated to 3.8%, and the market began pricing in the possibility of tighter FOMC monetary policy this year. These four factors allowed the bears to carry out a rapid, concentrated offensive. However, such an advance is typically short-lived and tends to exhaust itself quickly.
If today closes above 1.3398 (Friday's opening level), a bullish engulfing candlestick pattern will form. This would be a signal of a potential reversal. A bullish engulfing in this case would align with the reaction from bullish imbalance 18. Thus, a bullish signal may already form today despite the four-day decline in the pound. It is also worth noting that bearish imbalance 19 cannot be considered a priority for traders, as it was formed within a bullish trend.
The situation regarding the resolution of the Middle East conflict has become completely stuck, and traders are unsure in which direction the "pendulum" will swing next. Today it may swing toward bulls, tomorrow toward bears. This is exactly the pattern observed in recent weeks. At present, confidence in peace in the Middle East and in the reopening of the Strait of Hormuz has fallen to minimal levels, but this factor is likely already priced in.
In my view, the trend remains bullish despite the pair's strong declines this year. The ceasefire in the Middle East is fragile but still intact. Markets cannot rely indefinitely on expectations that are not confirmed by facts. The Strait of Hormuz remains effectively under a dual blockade, and although Tehran and Washington have shifted toward lifting restrictions several weeks ago, no results have been achieved. The situation continues to swing between improvement and deterioration. Markets were overly optimistic about a month ago, but have since been brought back to reality.
The current technical picture is as follows: only bullish imbalance 18 remains, which may trigger a reaction and revive the pound. If this pattern is invalidated, the decline may continue and a full bearish trend would then come into play. After last week's sell-off, a bearish imbalance was formed, but it will only become relevant if imbalance 18 is broken.
The economic background on Monday was absent, which allowed bulls to stage a counterattack. Last week, nearly every day brought news that triggered either dollar buying or pound selling. Once this negative flow stopped, bulls began to recover lost ground.
In the US, the overall informational backdrop still suggests that in the long term, nothing but dollar weakness can be expected. Even the Iran–US conflict changes little. Geopolitics temporarily revived the dollar's safe-haven status for about two months, but overall the long-term outlook remains negative. The US labor market continues to struggle, the economy is approaching recession, the Federal Reserve—unlike the ECB and the Bank of England—does not plan tightening in 2026, there have already been four major protests across the US against Donald Trump, and the departure of Jerome Powell could further weaken the dollar if a more dovish stance emerges under potential leadership changes. From an economic perspective, I see no grounds for dollar strength.
Economic calendar for the US and UK:
On May 19, the economic calendar includes four releases, with the UK data being the most important. Therefore, the economic backdrop may influence market sentiment on Tuesday.
GBP/USD forecast and trading recommendations:
The long-term picture for the pound remains bullish. The "Three Drives" pattern signaled the start of an upward move, and since then three bullish patterns and three bullish signals have formed. Last week, geopolitics disrupted the bullish outlook, but bulls still have the chance to maintain control at imbalance 18. I consider the 2026 high at 1.3867 as the target. I will only consider a bearish trend if imbalance 18 is invalidated. In that case, bearish patterns will come into play. Until then, I expect the formation of a new bullish signal at imbalance 18.
*এখানে পোস্ট করা মার্কেট বিশ্লেষণ আপনার সচেতনতা বৃদ্ধির জন্য প্রদান করা হয়, ট্রেড করার নির্দেশনা প্রদানের জন্য প্রদান করা হয় না।
ইন্সটাফরেক্স বিশ্লেষণমূলক পর্যালোচনাগুলো আপনাকে মার্কেট প্রবণতা সম্পর্কে পুরোপুরি সচেতন করবে! ইন্সটাফরেক্সের একজন গ্রাহক হওয়ায়, দক্ষ ট্রেডিং এর জন্য আপনাকে অনেক সেবা বিনামূল্যে প্রদান করা হয়।
