The GBP/USD pair experienced no new declines on Friday and generally stayed in place throughout the day. This was despite the publication of a significant amount of macroeconomic data, most of which supported the British pound. However, the pound remains within a descending correction after a three-week rise.
Overall, the recent decline of the British currency can only be loosely termed logical. Recall that the pound did show three weeks of growth, unlike the euro. Thus, a slight downward correction based on technical grounds was fully justified. We saw such a correction. It is also worth noting that inflation in the UK continues to slow down, hardly reacting to the geopolitical turmoil in the Middle East. However, in June, the Bank of England clearly indicated that it was not inclined to tighten monetary policy, so falling inflation could not signify a shift away from potential rate hikes by the central bank simply because the BoE is not preparing for any rate increase.
However, the BoE could now revert to a policy of easing. And this is a significant reason for the pound's decline. But how significant? For a 100-pip decline in the pound – yes, but for a prolonged decline – no. Meanwhile, Iran and the US seem tired of fighting and want to resume negotiations. Thus, the "Middle Eastern soap opera" continues. Donald Trump has again realized that rockets and bombs won't force Iran back to the negotiating table or make Tehran agree to Washington's proposed deal. Therefore, continuing military actions are not only meaningless but also costly. Defense Minister Pete Hegseth has already requested additional funding from Congress for the war against Iran, and previously Trump made a similar request. While Republicans currently hold the majority in Congress, additional funding is possible. Still, by November, the Republicans will lose at least one chamber, and then Trump will no longer be able to make decisions that he alone approves.
Trump still needs to conclude the war as quickly as possible but to do so from a position of victory. Continuing war with Iran will not yield an agreement. Therefore, there is only one way out – return to the negotiating table. We do not believe that new negotiations will be successful, but it should be understood that Tehran and Washington find themselves in a double stalemate. They cannot agree on anything, and war is yielding no results for either the US or Iran. Fighting is pointless, but negotiations seem meaningless too. Hence, we see these "swings": sometimes the parties launch rockets again, and at other times they return to discussing pressing issues. There is no resolution on either front.
Can we expect further growth of the dollar? Formally – yes. The market may continue to buy the US currency based on any factors, ignoring all the uncomfortable ones. Recall that the market is not obligated to move as someone wishes or to match its movements to the fundamental backdrop or geopolitics. Nevertheless, we still see no reasons for the further strengthening of the US dollar.
The average volatility of the GBP/USD pair over the last five trading days as of July 27 is 69 pips, which is considered "average" for the pair. On Monday, July 27, we expect the pair to move within the range of 1.3252 and 1.3390. The upper linear regression channel is directed downward, indicating a continuation of the downtrend. The CCI indicator has formed a bearish divergence and has entered the overbought area, signaling the start of a downward correction.
Nearest Support Levels:S1 – 1.3306
S2 – 1.3245
S3 – 1.3184
Nearest Resistance Levels:R1 – 1.3367
R2 – 1.3428
R3 – 1.3489
Trading Recommendations:The GBP/USD pair maintains an upward trend. Trump's policies will continue to exert pressure on the US economy, so we do not expect long-term growth from the US currency. The year 2026 is currently looking super positive for the dollar due to geopolitics, but every fairy tale comes to an end. However, on the weekly timeframe, there remains a flat between levels 1.3150 and 1.3780 within a four-year upward trend, which allows for the expectation of continued growth of the British currency in the medium term. Long positions with targets of 1.3489 and 1.3550 can be considered when the price is above the moving average. Consolidations below the moving average line allow for short positions with targets of 1.3252 and 1.3240.
Explanations for Illustrations:Linear regression channels help identify the current trend. If both are directed in the same direction, the trend is currently strong;
The moving average line (settings 20,0, smoothed) defines the short-term trend and direction in which trading should currently be conducted;
Murray levels are target levels for movements and corrections;
Volatility levels (red lines) indicate the probable price channel within which the pair will operate in the next 24 hours based on current volatility indicators;
The CCI indicator — its entry into the oversold area (below -250) or the overbought area (above +250) means an impending trend reversal in the opposite direction.