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07.05.2026 08:46 PMThe GBP/USD pair made another reversal in favor of the British pound and is preparing to resume its upward movement. Let me remind you that last week the price reacted to bullish imbalance 19, after which a new bullish imbalance 20 was formed, and yesterday the pair also reacted to this pattern. Of course, without positive geopolitical developments that reduced the attractiveness of the U.S. dollar in the eyes of traders, we might not have seen another rally. Nevertheless, traders had a clear area of interest and an obvious pattern within which a new buy signal was expected to form. As we can see, the signal has now appeared.
Until the end of the week, only geopolitics or unexpectedly strong U.S. labor market and unemployment data may prevent the bulls from continuing their advance. In my view, geopolitical developments can reverse at any moment, so all news related to negotiations between Iran and the United States should be monitored very closely. Official information remains extremely limited, but some reports appear convincing enough for the market to believe them. Iran and the United States may indeed be moving toward signing a "framework agreement," but whether it will ultimately be signed — and whether it would remain intact for more than a few days — remains unknown.
There is little else to add regarding the news background at the moment. Efforts to resolve the conflict in the Middle East are struggling to make progress, while traders remain uncertain about which direction events will turn next. Today the market shifted in favor of the bulls, but tomorrow it may easily swing back toward the bears. At present, bulls maintain the advantage, but if another escalation occurs, bears may launch a full-scale offensive.
The pound's rally began with a "Three Drives Pattern." Thus, traders received a bullish signal at the very beginning of the move, and the overall trend remains bullish. At the moment, the ceasefire in the Middle East remains fragile, but if media reports are to be believed, the parties involved are still attempting to reach an agreement. Official negotiations may resume, but the conflict itself may also resume. The Strait of Hormuz remains under dual blockade, though Tehran and Washington appear to be moving toward easing these restrictions. The situation is gradually improving, but these conclusions are based only on unverified information. Markets are currently filled with optimism, but sentiment could reverse sharply at any moment.
The "Three Drives Pattern," marked by a triangle on the chart, allowed bulls to launch their advance. Imbalance 18 allowed traders to open long positions, and imbalance 19 provided another buying opportunity. As a result, three bullish signals formed within the current impulse move, and this week another bullish signal appeared within imbalance 20. However, while geopolitics has allowed bulls to launch another rally, it could just as easily turn in favor of the bears.
The economic news background on Thursday was virtually nonexistent. No new reports regarding negotiations between the United States and Iran emerged, and there were very few economic releases. Traders are not currently focused on secondary information and are waiting instead for Friday's U.S. labor market and unemployment reports, which will become the final major event of what has been an interesting and relatively positive week.
In the United States, the overall background still suggests that, in the long term, little can be expected other than continued weakness in the U.S. dollar. Even the conflict between Iran and the United States changes very little in this regard. Geopolitical tensions temporarily reminded markets of the dollar's safe-haven status for about two months, but the broader outlook for the dollar remains difficult over the long term.
The U.S. labor market continues to weaken, the economy is approaching 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 further worsen the outlook for the dollar if the FOMC adopts a more dovish stance under Kevin Warsh. From an economic perspective, I see no strong reasons for sustained dollar growth.
The economic calendar for May 8 contains four events, at least two of which are important. Therefore, the impact of the economic background on market sentiment on Friday may be significant during the second half of the day.
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 bullish patterns and three bullish signals have formed. Therefore, under the current circumstances, despite geopolitical risks, I expect the pound to continue rising. However, it must be acknowledged that geopolitics could easily disrupt bullish momentum.
I consider the pound's target to be the 2026 high at 1.3867. The reaction to imbalance 20 allowed traders to open long positions for the third or fourth time already.
