On the hourly chart, the GBP/USD pair declined to the 76.4% Fibonacci retracement level at 1.3382 on Wednesday after rebounding from the 1.3454-1.3457 resistance level. Today, a close below this level would allow traders to expect a further decline toward 1.3335 and 1.3298. Conversely, a close above 1.3382 would favor the pound and support a modest recovery toward the 1.3454-1.3457 resistance level.

The wave structure remains bullish. The latest completed upward wave broke above the previous high, while the current downward wave has yet to break below the previous low. As a result, bulls remain optimistic despite the recent pullback. In my view, the 2026 bearish impulse has already ended, and only geopolitical developments could prevent bulls from extending their advance. However, at this stage, geopolitics is more likely to trigger only a corrective pullback rather than a trend reversal. The bullish trend would be invalidated only if the pair falls below the most recent low at 1.3340.

Wednesday's fundamental backdrop was negative for the pound. Traders had expected annual inflation to slow to 2.7%, but the Consumer Price Index actually eased further to 2.6% year-on-year. The pound avoided a sharper decline thanks to the core CPI, which remained unchanged in June despite market expectations for a decline. Therefore, inflation in the UK continues to slow over the medium term, although the disinflation trend may pause in the short term.

At present, the Bank of England has little reason to tighten monetary policy further. At the same time, it is still too early to consider another interest rate cut, given the renewed conflict between Iran and the United States and the rise in oil prices to $97 per barrel. Next week, both the Bank of England and the Federal Reserve will hold policy meetings, providing further insight into their policy outlooks, particularly that of the BoE. However, I do not expect the Bank of England to adopt a hawkish stance following June's inflation report. Therefore, further gains in the pound, at least over the next few days, appear doubtful.

On the 4-hour chart, GBP/USD rebounded from the 23.6% Fibonacci retracement level at 1.3538, reversed in favor of the US dollar, and continues to move lower toward the 61.8% Fibonacci level at 1.3348 and potentially below. A close below 1.3348 would increase the likelihood of further downside. No developing divergences are currently visible on any technical indicators.

Commitments of Traders (COT) Report

Sentiment among the non-commercial category became less bearish during the latest reporting week but remains negative overall. The number of long positions held by speculative traders increased by 6,521, while short positions declined by 10,129. The current balance stands at approximately 51,000 long positions versus 122,000 short positions.

Bears have dominated positioning in recent months. However, while this dominance was previously well supported by fundamentals, the changing macroeconomic backdrop has made the picture less clear.

I still do not believe in the resumption of a sustained bearish trend for the pound. In the near term, however, market direction will depend less on economic data, Trump's trade policy, or central bank decisions than on the duration, scale, and consequences of the conflict in the Middle East. In recent weeks, markets had begun pricing in the prospect of peace, but negotiations between Iran and the United States collapsed before making any meaningful progress. There is also no guarantee that talks will resume anytime soon.

Economic Calendar

United States - Initial Jobless Claims (12:30 UTC)

The economic calendar for July 23 includes only one event, which is unlikely to have a meaningful impact on market sentiment. As a result, the economic backdrop is expected to have little influence on trading on Thursday.

GBP/USD Forecast and Trading Tips

Short positions could be considered after a rebound from the 1.3526-1.3543 resistance level on the hourly chart or after a rejection from the 1.3454-1.3457 level, targeting 1.3382. That target has already been reached.

New short positions may be considered if the pair closes below 1.3382, with downward targets at 1.3335 and 1.3298. Long positions may be considered if the pair closes above 1.3382, targeting the 1.3454-1.3457 resistance level.

The Fibonacci retracement levels are plotted from 1.3457 to 1.3139 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.