On the hourly chart, GBP/USD rebounded three times last week from the 50.0% retracement level at 1.3404, reversed in favor of the US dollar, and began declining toward the 38.2% retracement level at 1.3342. A rebound from this level would keep the bulls in the game and allow them to quickly return to 1.3404. Consolidation below 1.3342 would increase the likelihood of a further decline toward the next retracement level at 1.3263, corresponding to 23.6%.

The market outlook remains bullish. The latest completed downward wave broke below the previous low, but the new upward wave has also broken above the previous high. Thus, the bulls have temporarily taken the initiative. The FOMC's tighter monetary policy stance and the hawkish outlook conveyed by Kevin Warsh supported the dollar for a month. Perhaps the time has now come for a bullish advance.

The news background on Friday was unfavorable for the bulls, which explains their weakness throughout the day. While the UK business activity indices posted encouraging results in October, the retail sales report was weak. In addition, the US business activity indices also performed strongly, giving the bears another reason to attack. The new week began with a decline, although no significant news had reached the market yet today. However, traders expect Kevin Warsh to adopt a more hawkish tone following the September US inflation report. They are also concerned about a possible resumption of the war between Iran and the US once the congressional elections are over. According to some media reports, Israel and the US have already begun preparations for a new military operation against Iran, involving further missile strikes on nuclear and military facilities. As a result, the dollar's value as a geopolitical safe haven is rising again. The pound could receive support from the Federal Reserve if it does not adopt a more hawkish monetary policy stance on Wednesday evening, or from the Bank of England next week if it raises interest rates. The bears have earned a corrective wave.

On the 4-hour chart, GBP/USD rebounded from the 50.0% retracement level at 1.3409, reversed in favor of the US dollar, and declined to the 61.8% Fibonacci level at 1.3348. A rebound from 1.3348 would favor the pound and a quick return to 1.3409. Consolidation below 1.3348 would allow traders to anticipate a further decline toward the next retracement level at 1.3277, corresponding to 76.4%. No emerging divergences are visible on any of the indicators today.

Commitments of Traders (COT) Report:

Sentiment among the Non-commercial trader category became less bearish over the latest reporting week. Speculators' Long positions increased by 10,043, while Short positions decreased by 16,501. The gap between Long and Short contracts currently stands at approximately 54,000 versus 134,000. The bears' advantage has narrowed again, although it has been growing in recent weeks. Previously, the bears' dominance was unquestionable, but it is now less clear because the news background has changed in recent months.

The bearish trend in the pound remains unconvincing, but developments in the near future will depend on Trump's trade policy, the monetary policies of the Federal Reserve and the Bank of England, and the duration, scale, and consequences of the war in the Middle East. In recent months, the market had shifted its expectations toward peace, but negotiations between Iran and the US failed before they had properly begun. The war between the two countries could resume in full force as early as November.

Economic Calendar for the US and the UK:

The economic calendar for October 26 contains no significant releases. The economic news background is therefore unlikely to influence market sentiment on Monday.

GBP/USD Forecast and Trading Tips:

Selling opportunities arose after the pair rebounded from 1.3404 on the hourly chart, with a target of 1.3342. These trades can remain open today. New short positions may be considered if the pair closes below 1.3342, with a target of 1.3263. Buying opportunities may arise if the pair rebounds from 1.3342 on the hourly chart, with a target of 1.3404.

The Fibonacci levels are drawn from 1.3674 to 1.3136 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.