The GBP/USD pair has once again reversed in favor of the pound and resumed its upward movement, fully in line with the current technical picture. Last week, price reacted to bullish imbalance 20, creating yet another buy signal — the fourth one so far. Naturally, without positive geopolitical developments that reduced the dollar's appeal in traders' eyes, this new rally might not have happened. Nevertheless, traders had a clear and obvious area of interest, as well as a recognizable pattern within which another buy signal was expected to emerge. As we can see, that signal has indeed formed.
The only factor capable of stopping the bulls' advance is geopolitics itself. In my view, geopolitical sentiment could reverse at any moment, which is why traders should closely monitor all news related to negotiations between Iran and the United States. Especially since there is still no visible progress in the talks. At the same time, situations that could end the temporary ceasefire and trigger renewed escalation are becoming increasingly frequent. Last week alone, there were three such incidents. The question now is: how many will occur this week?
The situation surrounding conflict resolution in the Middle East is struggling to move forward, while traders remain uncertain about which direction the pendulum will swing next. Today it may favor the bulls; tomorrow it may support the bears. For now, bulls still hold the stronger position, but if escalation resumes, bears could launch a full-scale offensive.
The pound's rally initially began with a "Three Drives Pattern." This gave traders a bullish signal at the very start of the move, and the overall trend remains bullish. At present, the ceasefire in the Middle East remains fragile, though the parties involved continue attempting to negotiate, at least according to media reports. However, markets cannot rely indefinitely on news that lacks factual confirmation. Official negotiations may resume, but the conflict itself could also reignite.
The Strait of Hormuz remains effectively under a dual blockade, and Tehran and Washington appear determined to lift it — though so far without success. The situation is improving, but very slowly, and conclusions are still based largely on unverified reports. Markets remain filled with optimism, but a harsh reality check could arrive at any moment.
The "Three Drives Pattern," marked on the chart with a triangle, allowed bulls to regain control. Imbalance 18 gave traders an opportunity to open long positions, imbalance 19 repeated that opportunity, and imbalance 20 did so once again. As a result, four bullish signals have appeared within the current impulse wave. Geopolitics enabled bulls to launch a new offensive, but it could just as easily turn in favor of the bears.
There was no significant economic news on Monday, though traders currently do not seem to need it. Friday brought several important reports, yet the market showed little interest in U.S. unemployment figures or Nonfarm Payrolls — let alone less important data releases. In this environment, the absence of economic statistics may actually be a positive factor for traders, since there is no need to speculate on whether the market will react to new macroeconomic data.
In the United States, the broader fundamental backdrop still suggests continued long-term weakness for the dollar. Even the conflict between Iran and the United States changes little in that regard. Geopolitics temporarily reminded markets of the dollar's safe-haven status for about two months, but structurally the outlook for the U.S. currency remains difficult over the long run.
The U.S. labor market continues to weaken, the economy is moving closer to recession, and unlike the ECB and the Bank of England, the Federal Reserve is not expected to tighten monetary policy in 2026. In addition, four major protests against Donald Trump have already taken place across the United States, while Jerome Powell's eventual departure could worsen the situation for the dollar further — especially if the FOMC adopts a more dovish stance under Kevin Warsh. From an economic perspective, I see no solid reasons for sustained dollar growth.
Economic Calendar for the U.S. and the UK
- United States – Consumer Price Index (12:30 UTC)
The economic calendar for May 12 contains only one event, but it is an important one. Therefore, economic data may influence market sentiment on Tuesday, particularly during the second half of the day.
GBP/USD Forecast and Trading Advice
The long-term outlook for the pound remains bullish. The "Three Drives Pattern" warned traders about the beginning of the rally, and since then three additional bullish patterns and three bullish signals have formed. Therefore, despite geopolitical uncertainty, I continue to expect further gains in the pound under current conditions.
However, it must be acknowledged that geopolitics could still spoil the bulls' momentum. My target for the pound remains the 2026 high at 1.3867. The reaction to imbalance 20 provided traders with another opportunity — the third or fourth already — to open long positions.
