The GBP/USD pair reversed in favor of the British pound and began an upward move. However, this move did not start from nowhere—it began from imbalance 19, which I have been discussing over the past two weeks. Of course, traders always look for the clearest and simplest trading signals, but this time the price remained within the zone of interest for two weeks. There is nothing to be done about that—it simply has to be accepted. That is how the market works. Ultimately, however, a bullish signal within a bullish trend was formed, and traders had the opportunity to open long positions. Now the pound may head toward the yearly high near the 1.3867 level. A new bullish imbalance may also form in the near future, which would provide another opportunity for buying. This week, the only event in the UK—the Bank of England meeting—worked in favor of the pound. Despite rates remaining unchanged and the regulator not explicitly signaling future tightening, the market believes such a step is inevitable. Inflation in the UK accelerated only moderately in March, but it was already higher than in Europe or the United States.
There is little more to add at the moment regarding the news background or the chart structure. The situation with resolving the conflict in the Middle East is completely stalled, and traders no longer even understand whether any attempts are being made to organize a new meeting between Tehran and Washington. The chart picture is simple and clear.
The pound's rise began with the "Three Drives pattern." Thus, traders received a bullish signal at the very beginning of the move, and the trend remains bullish. At present, the truce in the Middle East is quite fragile, and the parties involved have not yet decided what to do next: continue negotiations or resume hostilities. Negotiations may resume, but so could the conflict. The Strait of Hormuz remains under a dual blockade, and Tehran and Washington have not even been able to agree on a second round of talks, let alone a full agreement to end the conflict. In fact, as of Friday, nothing has changed for two weeks. The parties express a desire to sign a deal verbally, but in practice, no concrete steps are being taken.
The "Three Drives pattern," marked on the chart with a triangle, allowed bulls to go on the offensive. Imbalance 18 enabled traders to open long positions, and imbalance 19 provided another opportunity to do so. Thus, we have already received the third bullish signal within the current impulse. Bearish patterns and liquidity grabs are not causing any discomfort for bulls. I expect another bullish imbalance to form next week.
The economic news background on Friday was weak, but bulls, encouraged by the Bank of England's stance, continued their advance. The ISM Manufacturing PMI only supported them, as its reading came in below market expectations. The Federal Reserve did not support the dollar, and traders have largely turned away from geopolitics, as the most pessimistic scenario has already been priced in.
In the United States, the overall backdrop remains such that, in the long term, little can be expected other than a decline in the dollar. Even the conflict between Iran and the United States does not change much. Geopolitics temporarily revived the dollar's safe-haven appeal for about two months, but overall, the long-term outlook for the U.S. dollar remains challenging. The U.S. labor market continues to struggle, the economy is approaching recession, and the Federal Reserve—unlike the ECB and the Bank of England—does not plan to tighten monetary policy in 2026. Additionally, there have already been four major protests across the United States against Donald Trump personally, and Jerome Powell's departure could further worsen the situation for the dollar (if the FOMC becomes more dovish under Kevin Warsh). From an economic standpoint, I see no basis for dollar growth.
Economic Calendar for the U.S. and the UK:
On May 4, the economic calendar contains no significant events. The impact of the news background on market sentiment on Monday is expected to be absent.
GBP/USD Forecast and Trading Advice:
For the pound, the long-term outlook remains bullish. The "Three Drives pattern" warned traders of a possible rise, followed by the formation of a bullish imbalance and a bullish signal. The price performed liquidity grabs from bullish swings dated March 10 and March 23, as well as from the February 26 swing, but bears did not initiate an attack in either case. This is another positive factor for the pound—traders remain in a bullish mood. Under current conditions, despite geopolitical factors, I believe the upward movement will continue. Most likely, the euro will also continue to rise. I consider the 2026 high as the target for the pound. The reaction to imbalance 16 triggered a corrective pullback, while the reaction to imbalance 19 provided traders with a new buying opportunity.
