12.03.202604:55 Forex Analyse & Reviews: Overview of the GBP/USD Pair. March 12. What Is the Significance of U.S. Inflation and Labor Market Reports?

The GBP/USD currency pair leaned towards a decline on Wednesday due to the lack of real de-escalation in the Middle Eastern conflict. Iran is actively mining the Strait of Hormuz, the U.S. is striking destroyers, Tehran threatens to destroy the U.S., and Washington vows to eliminate Iran. Where is the de-escalation here? However, at the beginning of the week, Donald Trump offered markets hope. A hope that is unlikely to come to fruition anytime soon.

However, we should not focus solely on geopolitics. Yesterday, the U.S. inflation report was released, and last week we had data on the labor market and unemployment, while the week before featured the fourth-quarter GDP report. Despite the failure of nearly all key indicators, the dollar continues to rise. This raises the question: do macroeconomic reports affect the dollar?

The answer is complicated. Yes and no. For example, reports that clearly advocate weakening the U.S. currency are simply ignored by the market. Those reports supporting the dollar are being acted on. This pattern has not only been observed in the last 10 days; the market has also reacted to many macroeconomic reports before. This is because geopolitics currently outweighs economics. Investors are fleeing from risks and the Persian Gulf, where billions and trillions of oil dollars are concentrated, so demand for U.S. currency is simply rising, regardless of the fact that the U.S. labor market has again faltered, unemployment has risen, and the American economy shows rather mediocre results during its "golden age." Tariffs imposed by Trump have been overturned and deemed illegal, while overall inflation is decreasing, increasing the likelihood of further Fed easing.

In fact, the Fed may soon resume its rate-cut cycle, not even because of inflation, as we wrote a month ago. If the labor market remains in negative territory, it is evident that it requires stimulus. If the unemployment rate is rising, it is evident that Americans are still losing jobs. If the GDP growth rate is declining, it is clear that the economy needs a stimulus. If the war in Iran continues, it's clear that it will require significant funding. Thus, the Fed may again be faced with the need for forced rate cuts. This is bad news for the dollar, like all the aforementioned factors, but the geopolitical situation may continue to overshadow all this negativity.

From a technical standpoint, the upward trend on the daily timeframe remains stable. The dollar has been rising for a month and a half, and if this continues, eventually even the most resilient "bullish" trend will collapse. The question is: how long will the conflict in Iran last? If it lasts long enough, the dollar may indeed break its downward trend. But only Trump knows how long the war in Iran will continue.

The average volatility of the GBP/USD currency pair over the last 5 trading days, as of March 12, is 98 pips and is characterized as "average." On Thursday, March 12, we expect movement within a range limited by levels 1.3310 and 1.3506. The upper linear regression channel has flattened out, indicating a trend reversal. The CCI indicator has again entered oversold territory, signaling a potential end to the correction.

Nearest Support Levels:

S1 – 1.3428

S2 – 1.3306

S3 – 1.3184

Nearest Resistance Levels:

R1 – 1.3550

R2 – 1.3672

R3 – 1.3794

Trading Recommendations:

The GBP/USD pair has been in a correction for a month, but its long-term prospects have not changed. Trump's policies will continue to exert pressure on the U.S. economy, so we do not expect the U.S. currency to grow in 2026. Therefore, long positions targeting 1.3916 and above remain relevant when the price is above the moving average. The position of the price below the moving average allows for considering small shorts targeting 1.3306 based on technical (correctional) grounds. In recent weeks, nearly all news and events have turned against the British pound, leading to an extended correction.

Explanations for the Illustrations:

• Linear regression channels help to determine the current trend. If both are directed in the same direction, it means the trend is currently strong;
• The moving average line (settings 20.0, smoothed) determines the short-term trend and the direction in which trading should currently be conducted;
• Murray levels – target levels for movements and corrections;
• Volatility levels (red lines) – the likely price channel in which the pair will operate over the next day, based on current volatility indicators;
• The CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a reversal of the trend in the opposite direction is approaching.