The GBP/USD pair declined into bullish imbalance 18 last week, received a reaction from this pattern, formed a Bullish Engulfing candlestick pattern, and then returned to bearish imbalance 19. No reaction followed from imbalance 19, so the technical picture currently supports a bullish continuation. Unfortunately, only the technical picture supports this scenario — not geopolitics or politics.
The growth of the British currency over the past week and a half was driven by increased market optimism regarding the conclusion of a framework agreement between Iran and the United States. However, this week the chances of reaching such an agreement in the near future have sharply declined again, while the risks of continued conflict and failed negotiations have increased significantly. As a result, bears have once again received support, which may lead to a renewed decline in the pound.
Separately, it is worth mentioning the political crisis in the United Kingdom. According to rumors, Keir Starmer may leave the post of Prime Minister as early as next month. If this happens, the country could face another snap election, while its political and economic course may change once again. The United Kingdom continues to struggle following its withdrawal from the European Union, and so far no government has managed to stabilize the political situation or unite society.
The situation regarding the resolution of the conflict in the Middle East is gradually improving, but traders still fear that the pendulum could swing back toward escalation at any moment. In fact, this did not take long to happen. Yesterday, the United States launched new missile strikes on Iran, and all that remains is to hope that negotiations will not collapse after this and that the deal — which the parties supposedly already agreed upon — will not be canceled. Over the past two weeks, the market has received largely optimistic headlines, but there have been many cases in the past when optimism was shattered by harsh reality.
In my view, the trend remains bullish despite the pair's significant declines earlier this year. At present, the ceasefire in the Middle East remains rather fragile, but it is still holding and could even be extended for at least another 60 days if Tehran and Washington sign a framework agreement. However, at the moment the Strait of Hormuz remains under a dual blockade, the nuclear issue has not been resolved, and any progress in negotiations can only be judged based on statements from Donald Trump. The situation constantly shifts between positive and negative developments. For now, the market still believes in the agreement, but that confidence is not unlimited, and the latest events in the Strait of Hormuz could at the very least complicate further negotiations.
The technical picture is currently as follows. Bullish imbalance 18 triggered a price reaction, while bearish imbalance 19 is likely to be invalidated. Therefore, the technical setup fully supports further growth of the pound. All that remains is to monitor geopolitical developments closely in order to exit long positions in time if negotiations once again reach a deadlock and the framework agreement remains merely "95% agreed."
There was no significant economic background on Wednesday. A day earlier, bullish momentum faded after the United States launched another attack on Iran. The market is now awaiting Tehran's response while also preparing for the worst-case scenario. Under the current conditions, buying the pound can hardly be considered, even though the technical picture still supports further growth in the pair.
In the United States, the broader information backdrop remains such that, from a long-term perspective, there are few reasons to expect anything other than further weakening of the dollar. Even the conflict between Iran and the United States changes little in this regard. Geopolitical tensions temporarily reminded the market of the dollar's safe-haven status over the past two months, but overall the long-term outlook for the U.S. dollar remains difficult. The U.S. labor market continues to weaken, the economy is moving closer to recession, and the Federal Reserve has little room to tighten monetary policy in 2026. In addition, four major protest rallies against Donald Trump have already taken place across the United States, while Jerome Powell's departure could further worsen the outlook for the dollar if the FOMC under Kevin Warsh adopts a more dovish stance. From an economic standpoint, I see no grounds for dollar growth.
News Calendar for the United States and the United Kingdom
- U.S. Core Personal Consumption Expenditures Price Index (12:30 UTC)
- U.S. Durable Goods Orders (12:30 UTC)
- U.S. Personal Income and Spending (12:30 UTC)
On May 28, the economic calendar contains three events, but none stand out, as the market continues to focus exclusively on geopolitics. The impact of the economic backdrop on market sentiment on Thursday is expected to be weak or absent.
GBP/USD Forecast and Trading Tips
For the British pound, the long-term picture remains bullish. The Three Drives pattern warned traders about the beginning of an upward movement, and since then three bullish patterns and three bullish signals have formed, all of which traders could have used. Two weeks ago, geopolitics complicated the bulls' otherwise optimistic outlook, but they nevertheless retained the initiative and formed a new bullish signal within imbalance 18.
If the geopolitical backdrop remains positive, growth is likely to continue. I consider the 2026 high at 1.3867 to be the main target for the pound, while the nearest target stands at 1.3656. At present, there are no grounds for considering a bearish trend. The only bearish imbalance is on the verge of invalidation. Naturally, bearish patterns cannot form during an upward movement.
