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The GBP/USD currency pair on Wednesday attempted to continue its downward movement, but did so poorly. There was no macroeconomic, fundamental, or geopolitical news yesterday, leaving the market nearly stagnant throughout the day. Overall, traders can currently orient themselves solely based on geopolitics and technicals. Notably, geopolitics is more important but also more unpredictable. For example, it is extremely difficult to predict when the next message from Iran will come, or when Donald Trump will provide another comment on the progress of negotiations with Tehran and the proximity of an agreement. Therefore, traders must react to news that arrives at any time. The volatility of the pair remains low, and the market is clearly reluctant to engage in active trading, as the current uncertain and contradictory situation does not facilitate logical decision-making.
From a technical perspective, on the hourly timeframe, the formation of an upward trend has concluded, indicating that we may observe a decline in the pair this week. The price has surpassed the trendline. Without geopolitical support, it will be difficult for the British currency to demonstrate growth in the near future, and macroeconomic and fundamental factors continue to be ignored by the market. The dynamics of the British pound will depend not on technicals but rather on geopolitics. The market once again expects the worst and is preparing for it.
On Wednesday, no decent signals formed within the 5-minute timeframe. The price breached the Kijun-sen line several times, but this occurred during the American session, and it is difficult to determine what caused the price spikes upward and downward. Moreover, volatility remained low, so we tend to skip such signals.
On the 4-hour timeframe, the British pound did not receive a follow-up reaction to the "bullish" FVG in the 1.3453-1.3472 area; it consolidated below it, turning it into a "bearish" IFVG, and reacted to the newly formed pattern. Therefore, a decline may be observed in the near future. Traders had the opportunity to open short positions from the IFVG, but the strength and duration of the decline will depend on the geopolitical backdrop this week. Currently, the upward trend persists, as indicated by the CHOCH line.
On the hourly timeframe, the GBP/USD pair has completed its upward trend amid the latest escalation over the Strait of Hormuz. The macroeconomic and fundamental backdrop continues to have little impact on the pair's movements, and it is entirely absent this week. We do not believe that without a real escalation of the conflict in the Middle East, the dollar can show strong growth. The American currency can only count on a breakdown in negotiations between Iran and the U.S.
For May 28, we highlight the following important trading levels: 1.3096-1.3115, 1.3179-1.3187, 1.3369-1.3377, 1.3465-1.3480, 1.3588, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3477) and Kijun-sen (1.3450) may also serve as sources of signals. It is recommended to set the Stop Loss to breakeven if the price moves in the correct direction by 20 pips. The lines of the Ichimoku indicator may shift throughout the day, which should be taken into account when determining trading signals.
On Thursday, there are still no significant events scheduled in the UK, while the U.S. will release its first reports of the week, on durable goods orders and the core personal consumption expenditures (PCE) index. However, geopolitics will remain the most significant factor.
Today, traders may open short positions targeting 1.3369-1.3377 if the pair bounces from the 1.3465-1.3480 area. Long positions will become relevant after the 1.3465-1.3480 area is surpassed, with a target of 1.3588. On the 4-hour timeframe, short positions can be opened from the latest bearish IFVG. The decline of the British currency is not yet complete.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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