The GBP/USD pair has continued to trade within Bearish Imbalance 19 for the past two and a half weeks and has so far failed either to invalidate it or to form a sell signal. The chart structure continues to support a bullish advance; however, in that case, Imbalance 19 should be invalidated, and the price should be moving higher rather than remaining range-bound.
This week, Donald Trump once again stated that a deal with Iran could be signed in the very near future. At the same time, the United States and Iran exchanged strikes again, Tehran suspended negotiations with Washington at the beginning of the week, and it remains unclear whether consultations between the parties are still ongoing. The market is in a state of extreme uncertainty and is unwilling to make significant decisions without a clearer understanding of how events in the Middle East will develop in the near future.
Therefore, traders can currently do little more than wait for genuinely important information. It should be noted that Iran continues to insist on its right to use nuclear energy and is also demanding a complete cessation of military operations against itself and its allies.
Overall, the situation in the Middle East is better than it was a few months ago when active hostilities were ongoing. Nevertheless, traders remain concerned that the situation could shift toward renewed escalation. In fact, this is exactly what has been happening over the past two weeks. Last week, the United States carried out two missile strikes against Iranian targets, while Iran responded with strikes on U.S. bases in Kuwait. The new week began with the situation repeating itself twice more. The more frequently such exchanges occur, the lower the market's confidence in the prospects for a peaceful agreement.
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 fragile, but it is still in place and could be extended for another 60 days. However, the Strait of Hormuz remains under a dual blockade, the nuclear issue has not been resolved, and any assessment of progress in negotiations relies almost entirely on statements from Donald Trump. Iran maintains a very different position.
The situation continues to fluctuate between improvement and deterioration. For now, the market still retains some confidence that an agreement can be reached, but that confidence is not unlimited.
The current technical picture is as follows. Bullish Imbalance 18 generated a market reaction, whereas Bearish Imbalance 19 did not and is likely to be invalidated. Therefore, the chart structure continues to support further appreciation of the pound. The main task now is to monitor geopolitical developments closely in order to exit long positions promptly if negotiations once again reach a deadlock and the framework agreement remains agreed upon but unsigned.
The economic news flow on Wednesday once again had no impact on market sentiment. The pound continues to trade within Imbalance 19, and neither economic reports nor developments from the Middle East have been able to force traders out of this range.
The broader fundamental backdrop remains such that, from a long-term perspective, there is little reason to expect anything other than continued weakness in the U.S. dollar. Even the conflict between Iran and the United States changes little in this regard. Geopolitical developments temporarily reminded markets of the dollar's safe-haven status, but the long-term outlook for the U.S. currency remains challenging.
The U.S. labor market continues to weaken, the economy is moving toward recession, inflation is rising, and the Federal Reserve is unlikely to be in a position to tighten monetary policy in 2026. Across the United States, four major protests have recently taken place specifically against Donald Trump, while Jerome Powell's eventual departure could further worsen the outlook for the dollar if the FOMC adopts a more dovish stance under Kevin Warsh.
From an economic standpoint, I see no grounds for dollar appreciation. Only geopolitical developments are capable of supporting the U.S. currency.
Economic Calendar for the United States and the United Kingdom
United States
- Initial Jobless Claims (12:30 UTC)
The economic calendar for June 4 contains only one release, which is unlikely to attract significant market attention. Therefore, the economic backdrop is not expected to influence market sentiment on Thursday.
GBP/USD Forecast and Trading Recommendations
The long-term outlook for the pound remains bullish. The Three Drives pattern warned traders about the beginning of the upward move. Since then, three bullish patterns and three bullish signals have formed, all of which offered trading opportunities.
At present, bulls continue to hold the initiative and have formed a new bullish signal within Bullish Imbalance 18. If geopolitical developments become more favorable, the upward move is likely to continue.
My primary target for the pound remains the 2026 high at 1.3867, while the nearest target is 1.3656.
At this stage, there are no grounds for considering a bearish trend. The only bearish imbalance is close to invalidation, and no new bearish patterns have emerged.
