The GBP/USD pair generally remains in a downward phase, but that decline may already be approaching its end. Why do I believe so? To begin with—and I mentioned this earlier this week—in my view, the latest rally in the U.S. dollar was not fully justified by the news backdrop.
First, the geopolitical conflict in the Middle East has ended, despite being the primary driver behind the dollar's strength in 2026. Therefore, seeing the dollar rise first amid heightened geopolitical tensions and then continue rising after the end of the conflict is, at the very least, unusual. Second, the FOMC meeting and the regulator's hawkish stance could have supported the dollar on Wednesday and even Thursday of last week, but not for an entire week. The GBP/USD pair would have fallen even further had it not been for Monday's news of Keir Starmer's resignation. Therefore, I do not believe the news backdrop was the main reason behind the pound's decline.
At the same time, the technical picture now allows for a recovery in the British currency, at least toward the 1.3320 level. A reaction to bearish imbalance 22 did occur, but it was weak. Price first swept liquidity below the April 6 low and then below the March 31 low. As a result, we have both a weak reaction to the bearish pattern and two liquidity grabs on the bullish side. At the very least, a corrective rebound should follow.
Considering that the dollar still lacks compelling reasons to sustain a prolonged trend and has already posted an impressive rally in 2026, I believe the bears may struggle to extend their offensive. However, traders should always pay attention to the technical picture, which reflects actual market behavior. If no bullish patterns or signals emerge, long positions should not be considered.
The U.S. dollar generally performs better during periods of geopolitical tension than either the euro or the pound. Therefore, both currencies may still receive support if risk appetite continues to improve. At the moment, the market remains cautious regarding the agreement between Iran and the United States. Nevertheless, it can now be said that the war has officially ended, at least for the time being.
The Federal Reserve triggered a strong rally in the U.S. dollar, but I still do not understand what is allowing the bears to maintain their pressure. In my view, the broader trend remains bullish despite the pair's significant declines this year, which have lacked a convincing fundamental rationale.
The technical picture currently looks as follows. Last week, a new bearish imbalance 21 was formed, but price reacted to the closer bearish imbalance 22. The reaction proved weak, which supports the view that the current bearish impulse may be entering its final stage. I would also note the liquidity grabs below the two most recent lows, which warn of a potential bullish advance.
Friday's economic backdrop had nothing to do with the appreciation of the British pound, yet the currency still moved higher. However, in recent weeks we have repeatedly seen price action that was completely inconsistent with the news backdrop—from the end of the conflict in the Middle East to yesterday's U.S. GDP report.
The broader fundamental backdrop remains such that, in the long term, I can expect little other than a decline in the U.S. dollar. The conflict between Iran and the United States has not changed that outlook. Neither has the possibility of Federal Reserve rate hikes in 2026.
Geopolitical developments temporarily reminded the market of the dollar's safe-haven status, but the conflict has ended or is at least moving toward a resolution. The Federal Reserve intends to raise interest rates in 2026, which is undoubtedly supportive for the dollar. However, it should not be forgotten that tighter monetary policy would also slow the U.S. economy. Moreover, Kevin Warsh was appointed by Donald Trump to lead the FOMC not for the purpose of aggressively raising rates.
I believe that any tightening by the Federal Reserve, should it occur, would be a temporary measure aimed at quickly reducing inflation. After that, the U.S. central bank would likely return to a more accommodative policy stance. Therefore, in my opinion, any strength in the dollar is temporary in nature. Nevertheless, traders should not ignore the technical picture, which remains bearish.
News Calendar for the United States and the United Kingdom:
June 29: The economic calendar contains no scheduled events. Therefore, economic data will have no impact on market sentiment on Monday.
GBP/USD Forecast and Trading Tips:
From a long-term perspective, the outlook for the British pound remains bullish, while the reaction to bearish imbalance 22 resulted only in a weak bearish move. Therefore, a new sell signal was generated this week, and given that GBP/USD has been trading within a broad sideways range for nearly a year on the weekly chart, the current decline can be explained primarily by technical factors. Within a range-bound market, price movements can develop in either direction.
The latest rally in the U.S. dollar remains difficult to justify fundamentally, suggesting that the current move is largely technical in nature and occurring within a horizontal trading range. Following the emergence of a sell signal within imbalance 22, the British pound may decline toward the bullish trend invalidation level at 1.3007.
At the same time, two recent liquidity grabs support the bullish case. If a bullish pattern emerges, it will become easier for the bulls to regain control of the market.
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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