On the hourly chart, the GBP/USD pair reversed once again in favor of the British pound on Wednesday and climbed toward the resistance level of 1.3454–1.3466. A rebound from this zone favored the U.S. dollar and triggered a decline toward the 50.0% Fibonacci level at 1.3408 and the support level at 1.3349–1.3355. A consolidation above the 1.3454–1.3466 level would allow traders to expect renewed growth toward the resistance level of 1.3526–1.3539.

The wave structure shifted to a bearish outlook last week. The latest completed upward wave exceeded the previous peak by only a few pips, while the latest downward wave confidently broke below the previous low. Geopolitics is currently supporting the bears, as the market has still not seen the signing of even a temporary memorandum of understanding between Iran and the United States. At the moment, the ceasefire remains in place, but the situation is gradually shifting toward escalation and a prolonged confrontation.

Wednesday's news background supported the bears, although this support came mainly from Donald Trump's evening remarks, in which he stated that Iran was prepared to accept several of Washington's demands. However, this support for the bulls and the pound was short-lived, while the morning inflation report from the United Kingdom — which had been the main source of hope — was largely ignored. And unjustifiably so. Contrary to forecasts, the Consumer Price Index slowed not to 3.0% year-on-year, but to 2.8%. Core inflation also declined more sharply than the market had expected. As a result, the probability of monetary policy easing by the Bank of England has effectively dropped to near zero.

Based on this report and the conclusions drawn from it, the bears could have launched another attack yesterday, but both bears and bulls continue to ignore economic indicators. Thus, geopolitics remains the sole driver of traders' actions. Predicting the next developments on this front is extremely difficult. As recently as last night, Donald Trump set a new deadline for Iran, hinting that if Tehran refuses to sign an agreement, Washington could resume attacks as early as Sunday or the beginning of next week. Therefore, the bulls still have very few reasons for optimism.

On the 4-hour chart, GBP/USD rebounded from the 23.6% corrective level at 1.3327 and reversed in favor of the pound, rising toward the 38.2% Fibonacci level at 1.3429. A rejection from this level would favor the U.S. dollar and signal renewed decline toward 1.3327. A bearish divergence on the CCI indicator also worked in favor of the American currency. A consolidation above 1.3429 would support further gains for the pound.

Commitments of Traders (COT) Report:

The sentiment among the "Non-commercial" category of traders became less bearish during the latest reporting week. The number of long positions held by speculators increased by 17,032, while short positions decreased by 3,817. The gap between long and short positions now stands at approximately 79,000 versus 123,000.

For six consecutive weeks in February and March, non-commercial traders actively increased short positions and reduced long positions, creating a strong imbalance between long and short positions. In recent months, bears have dominated the market, which is unsurprising given the geopolitical backdrop.

I still do not believe in a sustained bearish trend for the pound, but everything now depends not on economic indicators, Trump's trade policy, or central bank monetary policy, but on the duration, scale, and consequences of the conflict in the Middle East. In recent weeks, the market had repositioned itself for de-escalation, but recent developments suggest that a full ceasefire remains far away and hostilities could resume at any moment.

Economic Calendar for the U.K. and the U.S.:

United Kingdom

• Manufacturing PMI (08:30 UTC)
• Services PMI (08:30 UTC)

United States

• Building Permits (12:30 UTC)
• Housing Starts (12:30 UTC)
• Initial Jobless Claims (12:30 UTC)
• Manufacturing PMI (13:45 UTC)
• Services PMI (13:45 UTC)

On May 21, the economic calendar includes seven scheduled events, with the British reports standing out as the most important. However, the influence of the economic backdrop on market sentiment on Thursday may remain limited.

GBP/USD Forecast and Trading Recommendations:

Selling opportunities were available after a rejection from the 1.3454–1.3466 level, targeting 1.3408 and 1.3349–1.3355. These positions may still be held open. Buying opportunities may emerge after a close above the 1.3454–1.3466 level, targeting 1.3526–1.3539, or after a rebound from the 1.3408 level.

Fibonacci grids are drawn from 1.3158–1.3655 on the hourly chart and from 1.3866–1.3158 on the 4-hour chart.