On the hourly chart, the GBP/USD pair reversed in favor of the U.S. dollar on Monday and consolidated below the 1.3454–1.3458 level. As a result, the decline may continue today toward the next Fibonacci retracement level of 38.2% at 1.3397. A rebound from the 1.3397 level would favor the pound and support a moderate recovery toward the 1.3454–1.3458 resistance level. Consolidation below the 1.3397 level would increase the likelihood of a further decline toward the next Fibonacci retracement level of 50.0% at 1.3348.

The wave structure remains bearish, despite how unusual that may sound. The latest completed downward wave broke below the previous low, while the latest upward wave failed to break above the previous high. Therefore, the bears still hold the initiative in the market, although they could lose it in the near term. In my view, the bearish impulse that began in 2026 has already been completed, and only geopolitical developments could prevent the bulls from continuing their advance. However, the geopolitical backdrop remains mixed.

Monday's news flow supported the bears, but they will need strong U.S. labor market and unemployment data, as well as confirmation that the FOMC is prepared to continue tightening monetary policy, to extend their advance. Recently, many analysts have started abandoning their hawkish forecasts, as each new speech by Kevin Warsh has been filled with statements that raise doubts. It may seem that Warsh is saying what the markets want to hear, while not appearing fully convinced by his own words. As a result, doubts about the Federal Reserve's willingness to raise interest rates are gradually increasing. This week, the bears may continue to receive support from the news backdrop, as the conflict in the Middle East could enter a new phase of escalation at any moment. Tehran denies that any negotiations with the United States are taking place, which has greatly angered Donald Trump. If negotiations are indeed not underway, renewed escalation is only a matter of time. Such an escalation would provide fresh support for the U.S. dollar. Moreover, sooner or later, the market is likely to stop believing that a possible agreement between Iran and the United States can still be reached.

On the 4-hour chart, the GBP/USD pair advanced to the 1.3467–1.3482 resistance level before rebounding from it. This rejection suggests a decline toward the 50.0% Fibonacci retracement level at 1.3409, which is exactly what we are currently observing. A rebound from the 1.3409 level would favor the pound and a resumption of the upward move. No emerging divergences are currently visible on any of the indicators.

Commitments of Traders (COT) Report:

Sentiment among the Non-commercial category became more bearish during the latest reporting week. The number of long positions held by speculative traders decreased by 2,824, while the number of short positions increased by 6,429. The gap between long and short positions now stands at approximately 61,000 versus 126,000. Although the bears continue to hold a significant advantage, both the gap and their dominance are gradually narrowing. Previously, bearish dominance was unquestioned, but the changing news backdrop has made the outlook less clear.

I still do not believe in a sustained bearish trend for the pound. However, in the near term, market direction will depend less on economic data, Trump's trade policy, or central bank monetary policy, and more on the duration, scale, and consequences of the conflict in the Middle East. In recent months, the market had become increasingly optimistic about the prospects for peace, but negotiations between Iran and the United States collapsed before making any meaningful progress. There is also no guarantee that they will resume anytime soon.

News Calendar for the United States and the United Kingdom:

• United States – JOLTS Job Openings (14:00 UTC).

The economic calendar for August 4 contains only one event, which I would not consider particularly significant. Therefore, the impact of macroeconomic data on market sentiment on Tuesday is likely to be very limited or absent altogether.

GBP/USD Forecast and Trading Tips:

Short positions became valid after the pair consolidated below the 1.3454–1.3458 level on the hourly chart, with downside targets at 1.3397 and 1.3348. These positions may still be held today. Long positions may be considered following a rebound from the 1.3397 level, with upward targets at 1.3458 and 1.3526.

The Fibonacci retracement levels are drawn from 1.3140 to 1.3557 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.