traded at 1.3515 on Tuesday as the US dollar strengthened. Pressure on the pound intensified earlier in the week following a sharp escalation in the conflict between the United States and Iran, with markets fearing the breakdown of the truce and turning towards safe haven assets.
The trigger was the increase in tensions around the Strait of Hormuz. The United States reported the detention of an Iranian ship, while Tehran refused to participate in future negotiations. This development supported and boosted the demand for the dollar.
An additional factor weighing on the pound is the UK's domestic politics. Prime Minister Keir Starmer is under pressure following the scandal surrounding the appointment of Peter Mandelson as ambassador to the United States. The market is attentive to his parliamentary speech and evaluating the risks of political instability.
Despite the current decline, the pound remains near two-month highs and is up about 2% on the month. It had previously been supported by expectations of reduced tension in the Middle East. If political pressure on the government intensifies further, the pound could regain some of its recent gains.
Technical analysis
On the GBP/USD Q4 chart, the market is forming a wide consolidation range above 1.3494, which currently extends to 1.3545. A move lower towards 1.3333 is likely in the near term. Following this correction, a new consolidation range is likely to form. A bullish break would open potential for a continuation wave to 1.3611, while a bearish break would suggest a further move to 1.3120. Technically, this scenario is confirmed by the MACD indicator, with its signal line above the zero level and pointing firmly downwards.
On the H1 chart, the market has formed a compact consolidation range around the 1.3515 level. A break lower could lead to a move towards 1.3444, followed by a possible rise to 1.3495. Technically, this scenario is confirmed by the stochastic oscillator, with its signal line below the 20 level and pointing firmly downwards.
Conclusion
The pound has come under pressure as renewed tensions between the United States and Iran over the Strait of Hormuz boost safe-haven demand for the dollar. At the same time, domestic political uncertainty adds an additional layer of risk. The detention of an Iranian ship and Tehran's refusal to negotiate have revived concerns about energy supplies and sent oil prices soaring. Meanwhile, the scandal surrounding the appointment of the UK ambassador has put Prime Minister Starmer in a difficult position, as markets assess the potential for political instability.
Despite the current pullback, sterling remains near two-month highs, having gained 2% this month. However, technical indicators suggest further declines in the near term, and the pound could regain more of its recent gains if geopolitical or political pressures intensify.
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.
