The GBP/USD pair reversed in the zone of an imbalance without a sequence number and resumed its decline without any specific target. Let me remind you that I did not even assign a number to the latest bearish imbalance, as it was relatively small. However, the euro at the same time reacted to a much larger imbalance, which led both currency pairs to resume their decline. In reality, the drop resumed under pressure from geopolitical factors rather than due to reactions to bearish imbalances or genuine bearish market sentiment. Traders and investors simply have no other option but to move into the safe-haven dollar. Everyone is fleeing risk and trying to preserve their capital. Therefore, the dollar itself deserves virtually no credit for the current strengthening.
There was no open escalation of the Middle East conflict last week, but the situation has not improved in the slightest. Iran continues blocking the Strait of Hormuz, countries of the Persian Gulf continue to strike each other with missiles and drones, Donald Trump is demanding support in the Middle East from European Union countries, and EU states are urgently trying to address the approaching energy crisis. In reality, discussing when the war in the Middle East will end has now become pointless. The same applies to listing all the military operations, strikes, and attacks. The fact remains: the war continues. Until it ends, the world will not breathe easily, and traders will not abandon the dollar.
At the moment, there are no bullish patterns, but a new bearish imbalance may form as early as today. The price dropped too sharply last week, so the formation of an imbalance is almost guaranteed. The euro also has an imbalance, meaning that for the second time in a row the euro and the pound may generate identical trading signals. The probability of another decline in both pairs is fairly high, although not absolute.
The bullish trend in the pound remains intact. As long as it persists (above the 1.3012 level), I would focus more on bullish signals. However, there are currently no bullish patterns or signals, while geopolitical pressure continues to weigh heavily on both the euro and the pound.
The news background on Monday was practically nonexistent, as very few market participants are currently interested in U.S. industrial production data. However, on Friday the news background worked against both the pound and the dollar. Still, I have little doubt that neither the British nor the American reports had any meaningful impact on trader sentiment, despite their significance.
In the United States, the overall information environment remains such that, in the long term, little can be expected other than a decline in the dollar. The conflict between Iran and the United States has changed very little in this regard. The situation for the U.S. dollar remains quite difficult in the long term but extremely favorable in the short term. U.S. labor market statistics continue to disappoint more often than they encourage. Three of the last four FOMC meetings ended with dovish decisions. Trump's military actions, threats toward Denmark, Mexico, Cuba, Colombia, EU countries, Canada, and South Korea, the criminal case against Jerome Powell, government shutdowns, the scandal involving the U.S. elite related to the Epstein case, the possibility of Trump's impeachment by the end of the year, and the highly likely defeat of Republicans in upcoming elections all add to the broader picture of a political and structural crisis in the United States. In my view, bulls have everything they need to resume their advance during 2026, but for now traders' attention is completely focused on geopolitics and the energy crisis.
For a sustained bearish trend, the U.S. dollar would require a strong and stable positive news background, which is difficult to expect under Donald Trump and which geopolitics alone is unlikely to provide. However, at this point I am no longer certain of anything. If a Third World War were to begin and military operations spread from the Middle East to the Eurasian continent, the dollar would likely strengthen significantly and for a long period of time. Nevertheless, I remain somewhat optimistic and hope that such a scenario will not occur. In that case, the dollar's growth potential remains limited by the negative developments in the Middle East.
News Calendar for the United States and the United Kingdom
- United States – ADP Employment Report (weekly) (12:15 UTC)
- United States – Existing Home Sales (14:00 UTC)
On March 17, the economic calendar contains only two entries, and there is little hope that the market will pay attention to them. The impact of the news background on market sentiment on Tuesday may once again be extremely weak or entirely absent.
GBP/USD Forecast and Trading Tips
From a long-term perspective, the outlook for the pound remains bullish. At the moment, there are no active bullish patterns; there is only a potential new bearish imbalance. The price would first need to return to this zone and react to it before traders could consider opening new short positions.
It is worth noting that the pound's decline over the past several weeks has been so strong largely due to an unfortunate chain of circumstances. If Donald Trump had not repeatedly threatened to attack Iran, had not sent military ships to the Persian Gulf, and had not ultimately initiated military action, we likely would not have seen such a strong rise in the dollar. I believe this decline could end as unexpectedly as it began. However, for now the decline continues, and the price has already reacted to the most recent bearish imbalance. If new signals appear, the pound's decline may extend toward the 1.3000–1.3100 level.
