On the hourly chart, the GBP/USD pair on Wednesday returned to the resistance level of 1.3596–1.3620 and made a second unsuccessful attempt to consolidate above it. Since the attempt failed, the British pound may decline today back toward the support level of 1.3513–1.3539. A consolidation above the 1.3596–1.3620 level would allow traders to expect continued growth toward the 76.4% Fibonacci retracement level at 1.3700.

The wave structure remains bullish. The latest completed upward wave broke above the previous peak, while the latest downward wave failed to break below the previous low. Geopolitical developments gave bears almost complete control of the market for two months, after which the geopolitical backdrop supported bulls for three weeks. At the moment, the situation in the Middle East remains contradictory but is shifting toward further escalation of the conflict and prolonged confrontation between Iran and the United States. Bulls are likely to face difficulties sustaining upward attacks in the coming weeks.

The news background on Wednesday gave traders renewed hope for peace in the Middle East, but for now this remains only hope. Recently, there have been numerous reports that Iran and the United States are holding negotiations, moving closer to a deal, preparing to sign various memorandums, and willing to continue talks. Only one thing is still missing — official agreements. The Strait of Hormuz will remain closed even if Washington and Tehran continue negotiations for another year, and this will not make the situation easier for anyone. Therefore, the mere fact that negotiations are taking place means little by itself. Traders are reacting to positive news from the Middle East, but in a restrained manner, as they understand that negotiations do not guarantee peace.

Tomorrow, the United States will release labor market and unemployment reports, so market attention may temporarily shift toward economic data. For most of the past three weeks, the pound has traded between 1.3437 and 1.3620, which means the probability of another decline remains fairly high. For the pound to continue rising, something more substantial than another round of negotiations is needed. For the U.S. dollar to strengthen, either further escalation or strong Nonfarm Payrolls and unemployment data would be required.

On the 4-hour chart, the pair consolidated above the descending trend channel, which allows expectations of a full-fledged bullish trend. A consolidation above the 38.2% Fibonacci level at 1.3540 supports the possibility of continued growth toward the 23.6% retracement level at 1.3664. However, the technical picture on the hourly chart is currently more informative. I recommend paying closer attention to the hourly chart. No new developing divergences are observed today.

Commitments of Traders (COT) Report:

The sentiment among the "Non-commercial" category of traders became more bearish during the latest reporting week. The number of long positions held by speculators decreased by 3,509, while the number of short positions increased by 5,091. The gap between long and short positions now effectively stands at 59,000 versus 120,000. For six consecutive weeks, non-commercial traders have actively increased short positions and reduced longs, creating a significant imbalance between long and short positions. Bears have dominated in recent months, which raises no questions given the geopolitical situation.

I still do not believe in a long-term bearish trend for the pound, but everything now 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 shifted toward expectations of de-escalation, but the latest news suggests that a complete ceasefire remains far away and that the conflict could resume at any moment. In that case, the advantage of the bears could strengthen further.

Economic Calendar for the United States and the United Kingdom:

• United States – Initial Jobless Claims Change (12:30 UTC).

The economic calendar for May 7 contains only one important event. Therefore, the influence of the economic background on market sentiment on Thursday may remain extremely limited. Traders are waiting for new geopolitical developments.

GBP/USD Forecast and Trading Recommendations:

Selling opportunities may arise today following a rebound from the 1.3596–1.3620 level on the hourly chart, with a target at 1.3526–1.3539. Buying opportunities were available following a rebound from the 1.3513–1.3539 level, targeting 1.3596–1.3620. The target has been reached. New long positions may be considered after a close above the 1.3611–1.3620 level, targeting 1.3700.

Fibonacci retracement grids are drawn from 1.3866–1.3158 on the hourly chart and from 1.3012–1.3868 on the 4-hour chart.