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The GBP/USD currency pair also aimed to resume its upward trend last week, even on the 4-hour timeframe, let alone the daily or weekly charts. We have no doubt that the British pound will continue to rise. This is because the dollar will continue to fall. Even the most global factors are against the American currency. It should be noted that the American currency appreciated for 15 years. The monthly timeframe clearly shows that the pair's decline began in 2007. All traders know that cycles change. The "dollar trend" has long needed to reverse. And this happened in 2022. That's when inflation in the US began to slow down, and the market started to expect a softening of monetary policy. Since then, the dollar has only been falling, and Donald Trump's return to power for a second term has only accelerated this trend.
At present, the British pound is around the level of 1.3633, and it only needs to rise 240 points to reach four-year highs. Geopolitics no longer supports the dollar, as the conflict is moving towards its conclusion, and the market has already fully accounted for this factor in February-March. There are no other trump cards for the American currency, and there never were. The market continues to ignore most macroeconomic and fundamental events, but even if it didn't, it wouldn't change anything. Perhaps the dollar would just fall even faster.
It is worth reminding that the Bank of England may raise the key rate once or twice this year due to rising inflation, while the Fed has no such option. It should be noted that this week the Federal Reserve will welcome Donald Trump's protege, Kevin Warsh, who will undoubtedly hold "dovish" views. No one knows how the Fed will act after that. Of course, it is tempting to say that the FOMC committee mostly supports Jerome Powell's views, and Powell himself will remain as the Fed Chair. Therefore, Warsh and Stephen Miran can vote for a rate cut at every meeting, but their votes won't be enough to make a decision. However, in reality, no one knows how events within the Fed will unfold now and who else Trump will try to fire through the courts.
This week, we cannot overlook the US inflation report, though any acceleration will not necessarily prompt the Fed to tighten monetary policy. Therefore, dollar support is not expected if inflation rises to 3.4-3.6%. In the UK, the first estimate of GDP for the first quarter will be released, which may show quite decent growth of the British economy under current circumstances. In any case, these reports will not affect the overall trend, and the market may also ignore them. As for geopolitics, this week we will again expect official information about negotiations, the unlocking of the Strait of Hormuz, and the agreement between Iran and the US.
The average volatility of the GBP/USD pair over the last 5 trading days is 88 pips. For the pound/dollar pair, this value is considered "average." On Monday, May 11, we thus expect movement within the range bounded by 1.3545 and 1.3721. The upper channel of the linear regression has turned upward, indicating a recovery of the upward trend. The CCI indicator has not generated signals recently.
S1 – 1.3611
S2 – 1.3550
S3 – 1.3489
R1 – 1.3672
R2 – 1.3733
R3 – 1.3794
The GBP/USD currency pair continues its recovery after two "months of geopolitics." Trump's policies will continue to put pressure on the US economy, so we do not expect the US currency to grow in 2026. Thus, 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 of 1.3489 and 1.3428 on technical grounds. In recent weeks, the British currency has recovered, and the geopolitical factor has lost some of its influence on the market.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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