FX.co ★ GBP/USD – Smart Money Analysis: The Pound Continues to Rise

The GBP/USD pair continues to rise, which I consider completely justified. Reports on the U.S. economy, labor market, and inflation have effectively settled the debate over whether the FOMC will raise interest rates in September. Nonfarm Payrolls declined for the fourth consecutive time and fell below zero. The U.S. economy is slowing. Inflation is declining. The situation may change based on the August data, but at present, the FOMC is much closer to maintaining a wait-and-see stance than to adopting hawkish decisions. As for the Bank of England, the probability of monetary policy tightening by the end of the year has increased following the July inflation report. Inflation accelerated, albeit slightly, and this acceleration could mark the beginning of a new trend. In addition, the U.S. Treasury's decision to increase its purchases of Treasuries can no longer be ignored. This is a clear signal to the market that the budget is under pressure and can no longer cope with the burden. Under Donald Trump, the national debt is growing rapidly.

Do the bears have any prospects at present? In my view, no. I mentioned in previous articles that the liquidity sweep from the July 15 high did not look convincing, while bullish Imbalance 26 serves not only as an area of interest for the bulls but also as a support zone. A new buy signal formed this week, giving traders an opportunity to open new long positions. Thus, since June 24, the pound has produced three buy signals and has also provided an early indication of the upcoming markup phase through liquidity sweeps. The bears currently have neither a pattern nor a signal.

As I mentioned earlier, geopolitics is no longer having a favorable impact on the dollar, as negotiations between the United States and Iran have effectively stalled. Officially, Tehran is negotiating only with Oman. It remains unclear what these negotiations will lead to in terms of ending the conflict and reopening the Strait of Hormuz. Iran may manage to agree with Oman on the terms for controlling the Strait of Hormuz, but how would that resolve the conflict with the United States and end the U.S. blockade of the strait?

This week, oil prices rose to $95 per barrel and, in my view, will return above $100 in the near future. In that case, inflation in the United States or the United Kingdom will begin accelerating again. At present, the Fed is unable to take a hawkish step, while the Bank of England, by contrast, is prepared to tighten monetary policy if inflation accelerates. This is the key difference. The pound has a significant advantage over the dollar.

The chart analysis shows a new bullish advance. At present, traders have three bullish imbalances (24, 25, and 26), within which buy trades can be considered. Imbalance 24 produced a bullish signal that traders could have acted on. Imbalance 25 remains untested. Imbalance 26 has also produced a buy signal. There are currently no bearish patterns. Therefore, traders only need to keep their long positions open. Another bullish imbalance may form at the close of the day today.

The fundamental backdrop on Thursday had no significant impact, as the market continued selling the dollar following the U.S. Treasury's decision to increase its purchases of long-term Treasuries. In my view, the upward move can continue even without new data supporting the pound.

The overall fundamental backdrop remains such that, in the long term, I cannot expect anything other than a decline in the U.S. currency. The war between Iran and the United States has not changed this either. Nor has the possibility of Fed rate hikes in 2026. Geopolitical developments prompted the market to remember the dollar's safe-haven status for several months, but the conflict has already passed its active phase. The chances of FOMC monetary policy tightening have declined substantially in recent weeks, putting pressure on the U.S. currency. Therefore, in my view, any dollar advance is temporary and short-lived. I see no reason for a new bearish advance.

News Calendar for the United States and the United Kingdom:

• United Kingdom — Change in Retail Sales (06:00 UTC).
• European Union — Services Consumer Price Index (08:00 UTC).
• European Union — Manufacturing Consumer Price Index (08:00 UTC).
• United Kingdom — Services Consumer Price Index (08:30 UTC).
• United Kingdom — Manufacturing Consumer Price Index (08:30 UTC).

On August 21, the economic calendar contains five entries, but none of them is particularly important under the current circumstances. The economic backdrop may have only a limited impact on market sentiment on Friday, particularly during the first half of the day.

GBP/USD Forecast and Trading Tips:

The long-term outlook for the pound remains bullish. After liquidity sweeps from the two most recent swings and the formation of a series of buy signals, the bulls continue their advance. I currently see no grounds for a bearish attack, as there are no bearish patterns or signals. The bulls received a buy signal from Imbalance 24, which remains valid. A new buy signal was formed at Imbalance 26. The next target for the pound is the January 27 high at 1.3867. A liquidity sweep of the May 1 high could push the pound somewhat lower, but it is unlikely to disrupt the bullish advance.