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05.10.2026 06:50 PM
The GBP/USD pair was in an almost continuous decline for eleven days, but for more than a week it has been making attempts to start a corrective move. At present, any correction is being limited by bearish imbalance 30, which acts as a resistance zone for the price. There are currently few reasons for bullish traders to be optimistic. Over the weekend, an armed conflict began in Yemen, while the market reacted only to a limited extent to Friday's Nonfarm Payrolls report and unemployment rate. The pound had opportunities last week following a series of hawkish statements from Bank of England officials and a strong second-quarter GDP report, but, as we can see, these factors have so far failed to produce a sustained recovery. In my view, bullish traders are showing weakness that is difficult to explain. The current fundamental backdrop for the euro and the pound is not sufficiently negative to prevent both currencies from showing even a modest increase.
I would also note that traders expect the Bank of England to deliver the same two monetary policy tightenings as the Fed. Moreover, as I have already mentioned, the dot plot points to only one policy tightening. Therefore, the Bank of England could ultimately tighten policy even more than the Fed, which clearly should not support further gains in the US dollar. However, the dollar is rising in most cases.
Despite the unfavorable situation that has developed for the British pound in recent weeks, the US dollar has also faced a number of negative factors in recent months. If the Fed had not decided to raise the interest rate in September and signaled its readiness to tighten policy at least once more before the end of the year, I would still expect the US dollar to decline. I continue to expect this, but from lower levels. However, bullish traders' opportunities now depend only on a liquidity sweep of the low from July 28 or June 24, as well as the formation of new bullish patterns, which would require a sustained upward move. The chart clearly shows that most reversals over the past year occurred after liquidity sweeps, so in my view, this represents a potential opportunity. Yesterday, the price reacted to bearish imbalance 30, but the reaction was relatively limited, which could indicate that bearish momentum is weakening. This could provide an opportunity for the pound. A limited one, but still an opportunity.
Do bearish traders have further prospects? In my view, they are limited, but it should be acknowledged that the dollar remains in a favorable phase and, until imbalance 30 is invalidated, retains strong prospects for further gains. The Fed not only decided to raise interest rates but also communicated its willingness to continue tightening policy. I do not believe that a prolonged decline in GBP/USD can be driven by this factor alone, but in recent weeks the market has focused primarily on the FOMC rate hike. What could prevent the market from continuing to buy the dollar for several more weeks amid the Fed's monetary policy tightening?
Technical analysis shows that the overall picture remains fully bearish following the liquidity sweep of the May highs. The pound reacted to bearish imbalance 27, which resulted in a 320-point decline in the exchange rate. The target of the decline was imbalance 25, and this pattern was both reached and broken. Bearish imbalance 30 represents a strong resistance zone for bullish traders.
The economic backdrop on Monday was of limited importance to traders, as has been the case in recent weeks. The US ISM services business activity index attracted some attention from traders but did not change the overall picture. Bearish traders continue to maintain full control of the market, and nothing has yet been able to reverse this situation.
The overall fundamental backdrop remains such that, in the long term, I can expect and continue to expect nothing other than a decline in the US dollar. The conflict between Iran and the United States has not changed my expectations. Geopolitical developments led the market to focus on the dollar's safe-haven status for several months, but the conflict has already passed its most acute phase. The future path of FOMC monetary policy remains uncertain, while the market continues to price in further tightening, which is the main reason for the current favorable conditions for bearish traders. In my view, any rise in the dollar is temporary and driven by short-term factors. I would also note that GBP/USD has been trading within a range for an entire year. A range allows for a wide variety of price movements within its boundaries.
The October 6 economic calendar contains two releases, both of which can be considered secondary. The economic backdrop is unlikely to have a significant impact on market sentiment on Tuesday.
The long-term outlook for the pound remains bullish. Bearish traders have controlled the market in recent weeks, but overall, the range is visible even on the daily chart. The liquidity sweep of the swing low from May 1 triggered a new decline, while a sell signal within inverted imbalance 27 allowed the decline to continue. Therefore, the pound remains in a prolonged decline, which could continue toward the June lows, where another liquidity sweep could occur, followed by a reversal in favor of the pound. However, in the near term, the price could react once again to bearish imbalance 30, potentially generating a sell signal. In that case, the decline would continue.
