was trading at 1.3364 on Thursday. The pair fell over the previous two sessions and is now showing signs of a tentative recovery amid expectations of a possible de-escalation of the conflict in the Middle East.
The United States has reportedly presented Iran with a 15-point solution plan following discussions over a possible month-long truce. However, Iran has refused to participate in the negotiations, saying that American diplomacy cannot be trusted.
In the UK, February inflation figures were in line with expectations. Headline CPI remained stable at 3%, while core inflation rose slightly to 3.2% against a forecast of 3.1%. However, the data had a limited impact on the market as it reflected the conditions leading up to the latest escalation in the Middle East.
Against a backdrop of falling oil prices, investors are revising their expectations for Bank of England policy. The market is now pricing in less than two rate hikes before the end of the year, with the total expected adjustment estimated at about 68 basis points, down from nearly 75 basis points previously.
Technical analysis
On the GBP/USD H4 chart, the market is forming a wide consolidation range around 1.3354, which currently extends to 1.3434. A drop to 1.3255 is expected in the short term, followed by the formation of a new consolidation range. A bullish break would pave the way for a continuation wave to 1.3494, while a bearish break would suggest a further move to 1.3119. Technically, this scenario is confirmed by the MACD indicator, whose signal line is above zero and pointing firmly downwards.
On the H1 chart, the market has formed a compact consolidation range around 1.3355. A break lower has initiated a wave structure that extends to 1.3255. If this level is broken, a further decline towards 1.3125 is likely. On the contrary, an upside breakout of the range could trigger a wave of growth to 1.3494. Technically, this scenario is confirmed by the stochastic oscillator, with its signal line below 20 and pointing firmly downwards.
Conclusion
GBP/USD is navigating competitive forces amid near-term volatility driven by geopolitical headlines. While tentative signs of a possible truce between the United States and Iran have offered some relief to markets, Iran's rejection of negotiations underscores the fragility of hopes for a reduction in tension. Meanwhile, UK inflation data – although in line with forecasts – has been largely overlooked given its pre-escalation time frame. Lower oil prices have led markets to reduce expectations of a Bank of England tightening, offering modest support to sterling. As technical indicators point to continued consolidation and the situation in the Middle East remains fluid, the direction of the pair in the near term will likely depend on new geopolitical developments.
By RoboForex Analysis Department
Disclaimer:
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
