The GBP/USD currency pair declined significantly on Friday, with no specific news driving the move. Just on Thursday, the Bank of England showcased a hawkish stance, and for the first time in a long while, the pound sterling was strong. Yet on Friday, it faced pressure again, and no one knows what will happen next week. As we mentioned earlier, the main theme in the currency market remains geopolitics. On Saturday, Donald Trump announced his readiness to strike Iran's energy infrastructure if Tehran does not unblock the Strait of Hormuz within 48 hours. On Sunday, Iran responded by stating that if Washington attacks its energy sector, Iran will retaliate against energy and IT facilities in the region. Tehran warned that, in this case, the entire Middle East would plunge into a total blackout, without water or internet access. As we can see, there is currently no sign of de-escalation in the conflict.
Since the coming week may bring only negative geopolitical news, the macroeconomic background might be overshadowed again. Under the current circumstances, we see no reason to focus on economic data, as there is a 90% chance they will not be well received by the market. Nevertheless, we will draw traders' attention to the most important data. Perhaps during the publication period, Tehran and Washington will have a day off, and the market will shift focus to macroeconomic factors.
On Tuesday, business activity indices for the manufacturing and services sectors for March will be released. It is quite possible that business activity will significantly decrease, but this will occur globally, not just in the EU or the UK. The question is where the decline will be more pronounced. On Wednesday, the UK inflation report for February will be published, but in February, the conflict in the Middle East had not yet started, so expecting a surge in inflation for that month is unreasonable. In any case, the Bank of England has already indicated that it expects inflation to rise in the second and third quarters, making the Consumer Price Index figure for February somewhat irrelevant. Everyone is interested in how much inflation will increase for March and the following months.
In the remaining two days of the week, several "second-tier" reports will be released in the UK and the US, which are unlikely to attract much attention. Unfortunately, over the next five days, the dynamics of the currency market will depend again on geopolitical events. The worse the news from the Middle East, the more likely we will see a new rise in the US dollar.
From a technical perspective, the GBP/USD pair settled above the moving average on Thursday but fell back below the moving average line on Friday. Geopolitics can provoke various price movements that may not align with the technical picture.
The average volatility of the GBP/USD pair over the last 5 trading days is 138 pips, which is considered "high" for this pair. Therefore, on Monday, March 23, we expect movement within the range limited by the levels 1.3202 and 1.3478. The upper linear regression channel has turned sideways, indicating a potential trend reversal. The CCI indicator has twice entered the oversold zone, further warning of a potential end to the correction and forming a "bullish" divergence.
Nearest support levels:
S1 – 1.3306
S2 – 1.3184
S3 – 1.3062
Nearest resistance levels:
R1 – 1.3428
R2 – 1.3550
R3 – 1.3672
Trading Recommendations:
The GBP/USD pair has been correcting for a month and a half now, but its long-term outlook has not changed. Trump's policies will continue to exert pressure on the US economy, so we do not anticipate the US currency appreciating in 2026. Thus, long positions targeting 1.3916 and higher remain relevant as long as the price is above the moving average. If the price is below the moving average line, small shorts can be considered, with targets at 1.3202 and 1.3184, based on geopolitical factors. In recent weeks, almost all news and events have turned against the pound sterling, leading to an extended corrective phase.
Explanations for Illustrations:
Linear regression channels help identify the current trend. If both are directed in the same way, it indicates a strong trend;
The moving average line (settings 20,0, smoothed) determines the short-term trend and direction in which trading should currently proceed;
Murray levels are target levels for movements and corrections;
Volatility levels (red lines) indicate a probable price channel in which the pair will trade over the next 24 hours based on current volatility readings;
The CCI indicator entering the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.
