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On the hourly chart, the GBP/USD pair advanced to the 50.0% Fibonacci retracement level at 1.3348 on Monday before reversing in favour of the US dollar. The pair then declined and consolidated below the 61.8% Fibonacci retracement level at 1.3298. As a result, the decline may continue today towards the next Fibonacci level at 1.3238 (76.4%). A sustained move back above 1.3298 would favour the pound and open the way for a renewed advance towards 1.3348.
The wave structure has turned bearish. The most recently completed upward wave exceeded the previous peak, while the latest downward wave broke below the previous low. This indicates that the bears have regained control of the market. In my view, the bearish impulse that dominated much of 2026 has already run its course, and only geopolitical developments are preventing the bulls from extending their recovery. At present, geopolitical risks are once again weighing on risk-sensitive assets.
Monday's news flow initially gave bullish traders an opportunity to launch a counterattack, which they successfully did during the Asian session. However, as the day progressed, sellers regained control for what appeared to be no obvious reason. Nevertheless, an explanation can be found. This week, the FOMC is due to hold its policy meeting, and traders may once again be anticipating hawkish rhetoric from Kevin Warsh. In my opinion, the market is expecting too much from both the Federal Reserve and Kevin Warsh personally, as the exceptionally high level of geopolitical uncertainty makes it impossible for the Fed to produce reliable inflation or economic forecasts even a few months ahead, let alone signal further monetary tightening with confidence. Therefore, expectations are one thing, but reality may prove very different. Meanwhile, traders continue to ignore current economic data. The US durable goods orders report was notably weak, yet the dollar barely reacted. Today's economic calendar is unlikely to have a significant impact on market sentiment, but geopolitical developments and the upcoming FOMC meeting may continue to support the bears.
On the 4-hour chart, GBP/USD rebounded from the 61.8% Fibonacci retracement level at 1.3348, reversed in favour of the US dollar, and resumed its decline towards the 76.4% Fibonacci retracement level at 1.3277. A confirmed break below 1.3277 would increase the likelihood of a further decline towards the 100.0% Fibonacci level at 1.3159. At the same time, the CCI indicator is beginning to form a bullish divergence, which could coincide with a rebound from the 1.3277 support level.
Sentiment among Non-Commercial traders became less bearish during the latest reporting week but remains bearish overall. The number of long positions held by speculators increased by 13,197, while short positions declined by 2,495. The current balance stands at approximately 64,000 long positions versus 119,000 short positions. Although bears still retain a clear advantage, the gap between long and short positions continues to narrow. Previously, bearish dominance was unquestionable, but the changing fundamental backdrop has begun to challenge that view.
I still do not believe that a sustained bearish trend in sterling is likely. However, in the near term, market direction will depend less on economic data, Trump's trade policy, or central bank monetary policy than on the duration, scale, and consequences of the conflict in the Middle East. In recent months, markets had begun to price in the prospect of peace, but negotiations between Iran and the United States collapsed before they had made meaningful progress. Moreover, there is no guarantee that they will resume in the near future.
United States
The economic calendar for July 28 contains only these two releases, neither of which I consider particularly important. Therefore, the impact of macroeconomic data on market sentiment on Tuesday is expected to be limited or negligible.
Short positions may be considered following a confirmed close below 1.3298 on the hourly chart, with downward targets at 1.3238 and 1.3177. Long positions may be considered if the pair consolidates above 1.3298, with upward targets at 1.3348 and 1.3397.
Fibonacci retracement levels are plotted from 1.3140 to 1.3557 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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