On the hourly chart, the GBP/USD pair continued its decline on Thursday and during the day broke below the support level of 1.3454–1.3466 and the 50.0% Fibonacci retracement level at 1.3408. Today, the pound reached the next support level at 1.3349–1.3355. A rebound from this zone would allow for some upward movement toward the 1.3408 and 1.3454 levels. A consolidation below it would increase the probability of further decline toward 1.3277 and 1.3177.

The wave structure remains bullish. The latest completed upward wave exceeded the previous peak by only a few pips, while the latest downward wave broke below the previous low. Geopolitics is once again supporting the bears, as the market has still not seen the signing of an agreement. At the moment, the ceasefire between Iran and the U.S. continues, but the situation is shifting toward escalation and prolonged confrontation. The bears have regained momentum.

The news background on Thursday was mixed, but the bears managed to make the most of the situation. British data on industrial production and economic growth came in neutral and therefore could not have triggered such aggressive bearish attacks. U.S. statistics consisted of only one report on retail sales, which also could not have caused such a sharp drop. Therefore, there is little need to speculate about the reasons for the pound's collapse: politics and geopolitics.

Previously, risk-sensitive currencies like the euro or pound regularly fell because of growing demand for the dollar amid rising geopolitical tensions in the Middle East. This week, however, politics has been added to geopolitics. In the United Kingdom, prime ministers are resigning one after another as a sign of disagreement with Keir Starmer's policies. Starmer's Labor Party suffered a crushing defeat in local elections, but the Conservatives were not particularly popular either. The election results clearly illustrate whether the British public supports Starmer's political course. At the same time, they show that the public also has little trust in the Conservative Party, which has governed for about fifteen years. Thus, Britain is facing another political crisis since Brexit, and the market is reacting by selling the pound.

On the 4-hour chart, the GBP/USD pair accelerated its decline toward the 23.6% Fibonacci retracement level at 1.3327. A rebound from this level would favor the British currency and some growth toward the 38.2% Fibonacci level at 1.3429. A consolidation below 1.3327 would increase the probability of further decline toward the 0.0% retracement level at 1.3159. No new emerging divergences are observed today.

Commitments of Traders (COT) Report:

The sentiment among the "Non-commercial" category of traders became more bearish over the latest reporting week. The number of long positions held by speculators increased by 2,996, while the number of short positions increased by 6,265. The gap between long and short positions now effectively stands at 62,000 versus 126,000. For six consecutive weeks in February and March, non-commercial traders actively increased short positions and reduced long positions, creating a strong imbalance between long and short holdings. In recent months, the bears have dominated, which comes as no surprise given the geopolitical situation.

I still do not believe in a bearish trend for the pound, but now everything depends not on economic indicators, Trump's trade policy, or central bank monetary policy, but on the duration, scale, and consequences of the war in the Middle East. In recent weeks, the market had shifted toward expectations of de-escalation, but recent news suggests that a full ceasefire is still far away and the war could resume at any moment. In that case, the bears' advantage could become even stronger.

Economic calendar for the U.S. and the U.K.:

U.S. – Industrial Production Change (12:30 UTC).

The economic calendar for May 15 contains only one entry, which is not especially important under current circumstances. The influence of the economic backdrop on market sentiment on Friday may therefore be extremely weak.

GBP/USD forecast and trading advice:

Selling opportunities were available after a rebound from the 1.3632–1.3641 level on the hourly chart, with targets at 1.3513–1.3526 and 1.3428–1.3437. All targets were reached with a significant margin. Today, selling remains relevant after a close below 1.3349, with targets at 1.3277 and 1.3177. Buying opportunities are possible after a rebound from the 1.3349–1.3355 level, with targets at 1.3408 and 1.3454.

Fibonacci retracement grids are drawn from 1.3158–1.3655 on the hourly chart and from 1.3866–1.3158 on the 4-hour chart.