FX.co ★ GBP/USD – July 7th: Donald Trump Again Threatens Iran

On the hourly chart, the GBP/USD pair rebounded from the 61.8% Fibonacci retracement level at 1.3335 on Monday, reversed in favor of the British pound, and consolidated above the 76.4% Fibonacci level at 1.3382. As a result, the upward move may continue on Tuesday toward the next resistance level at 1.3454–1.3457. Consolidation below the 1.3382 level would suggest a decline toward 1.3335 and 1.3298.

The wave structure turned bullish last week. The latest completed downward wave broke below the previous low, while the new upward wave surpassed the previous high and continues to develop. Thus, the bulls have finally taken control, although I expected this to happen about two to three weeks earlier. It is now important for them to maintain the current momentum. The British pound is appreciating at a fairly rapid pace, but further gains by the bulls will require supportive news.

Monday's news background had no impact on trader sentiment, as the only ISM report matched market expectations. However, overnight, Donald Trump renewed his threats against Tehran. The U.S. president stated that if negotiations over Iran's nuclear program fail, Washington will resume military operations in the Middle East. Trump believes the parties are close to reaching an agreement, although no details of the negotiations have been disclosed. Moreover, it became known yesterday that the next round of talks will not begin until July 11, while Iran's nuclear program has not yet even been discussed. It is worth recalling that Iranian officials have repeatedly indicated that they are prepared to accept, at most, international monitoring of their nuclear facilities. There has been no indication that Iran is willing to abandon uranium enrichment or transfer its uranium stockpiles outside the country. Therefore, it remains unclear what kind of agreement Donald Trump expects or is able to conclude. If the U.S. president is satisfied with a deal based on international monitoring of Iran's nuclear facilities, the parties may be able to reach an agreement on this issue. However, was it worth starting an entire war only to end up with an agreement similar to the 2015 nuclear deal, from which Trump himself withdrew during his first presidential term?

On the 4-hour chart, the GBP/USD pair rebounded from the 100.0% Fibonacci retracement level at 1.3159, reversed in favor of the British pound, and advanced toward the 50.0% Fibonacci level at 1.3409. Consolidation above 1.3409 would allow traders to expect further growth toward the next Fibonacci retracement level at 38.2% (1.3467). A rebound from the 1.3409 level would favor the U.S. dollar and a moderate decline toward 1.3348 and 1.3277. No emerging divergences are currently observed.

Commitments of Traders (COT) Report

Sentiment among the Non-commercial category became less bearish during the latest reporting week but remains bearish overall. The number of long positions held by speculators decreased by 3,623, while the number of short positions declined by 7,195. The gap between long and short positions now stands at approximately 37,000 versus 139,000. Bears have dominated the market in recent months. However, while this dominance previously raised no concerns, the significantly changed news background now calls it into question. The bears still maintain more than a threefold advantage.

I still do not believe in a sustained bearish trend for the British pound. In the near term, however, everything will depend 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 has shifted toward expectations of peace, but negotiations between Iran and the United States could prove lengthy and difficult. There is no guarantee that they will ultimately result in the signing of a nuclear agreement.

U.S. and U.K. Economic Calendar

• United States: ADP Employment Change (12:15 UTC).

The economic calendar for July 7 contains only one event. As a result, the influence of the economic news background on market sentiment on Tuesday is expected to be extremely limited or absent.

GBP/USD Forecast and Trading Tips

Short positions may be considered today if the pair consolidates below 1.3382 on the hourly chart, with downward targets at 1.3335 and 1.3298. Long positions were possible after a rebound from 1.3335, targeting 1.3382 and 1.3457. The first target has already been reached.

The Fibonacci retracement levels are drawn from 1.3457 to 1.3139 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.