The GBP/USD currency pair remains within a range, marked by its consistent inability to surpass the $1.3637 level in recent days. This currency pair typically shifts rapidly into new price levels with minimal genuine retracements, leading to potential discouragement among traders during consolidation periods. This ranging pattern may soon shift, as bullish pressure is indicated by the higher lows observed in recent price action over the past week. The current intrigue surrounding USD currency pairs stems from the uncertainty regarding the US Dollar’s direction. However, the price action at the end of last week indicated that the Dollar appeared heavy and might be poised to reach new lows.
The uncertainty surrounding the US Dollar may indicate vulnerability, reinforcing expectations for a significant bullish breakout beyond the $1.3637 area. The price chart below shows that this level has been tested three times already. Repeated failures before a successful breakout often lead to a more powerful breakout, potentially generating significant profits on the long side. It is important to recognize another significant resistance level just above $1.3637 that bulls must surpass to advance effectively in a long trade. The “coiling” below $1.3637 is drawing the attention of additional traders. The price action has demonstrated higher lows since May 4th, yet a distinct line of resistance exists, aligning with the round number at $1.3637, followed by another at $1.3666. No strong long-term trend supports the price’s tendency to range.
However, a weak medium-term bullish trend exists, making me generally more comfortable looking for a long. The price chart below illustrates these features. Trading this pair is generally more effective on breakouts rather than pullbacks, due to its propensity for impulsive market movements. It is less liquid than the EUR/USD, with which it tends to have a positive correlation. May has seen a consolidation characterized by a flat top and a series of higher lows, indicating that the pressure on sell orders around $1.3637 appears to be intensifying. Even if a bullish breakout above $1.13637 occurs, the extent of the price increase remains uncertain. A key resistance level is nearby at $1.3666, while the next significant one is 40 pips further up.
The ongoing USA/Iran conflict and associated tensions have persisted for several months, making it easy to overlook, particularly given President Trump’s numerous threats that have not materialized. Iran has firmly rejected US deal offers to end the war, insisting on terms that exceed President Trump’s red lines. A return to kinetic war, which could occur abruptly, is a possibility. President Trump often schedules military actions over weekends when financial markets are closed. However, unexpected news of such actions, or even an accidental clash or escalation, could lead to a rise in the USD, which typically gains as a safe haven in these situations.