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29.10.2026 06:32 PM
GBP/USD began rising after liquidity was taken from the most recent bearish swing, gaining a total of 260 points. The technical picture has turned bullish. The news background supported the bulls last week, but the bullish momentum has now stalled as the price encountered bearish imbalance 29. The chart clearly shows the price reacting to this pattern, triggering a corrective pullback. The targets for this retracement are two new bullish patterns that are also visible on the chart. The pound was expected to fall to 1.3300, and the price declined to 1.3271. A resumption of the pound's advance is expected after one or both of the available bullish patterns have been tested. Bullish imbalance 31 has now been mitigated, and the price may react to it, forming a bullish signal. Next week, the Bank of England may tighten monetary policy, which would support bullish traders, provided they do not relinquish control of the market by then. The Fed, in turn, did not support the bears as much as they had probably expected. Their expectations may have been based solely on Kevin Warsh making explicit promises to continue tightening monetary policy next year. There are no longer any questions about the December meeting. Therefore, the probability of a rebound from imbalance 31 or the order block appears very high. As a reminder, a hawkish Bank of England meeting lies ahead.
Another important factor for the pound's outlook is that traders expect the Bank of England to tighten monetary policy three times, while the Fed is expected to do so only once or, at most, twice. The dot plot also points to one policy tightening over the coming year, and the latest FOMC minutes confirmed that most central bank policymakers expect only one rate hike. Of course, it remains unclear how events will unfold in 2027, but that is the weighted-average forecast at present. As a result, the Bank of England could ultimately raise rates more aggressively than the Fed in the coming months, which would clearly not support further gains in the US dollar. The dollar has already fully benefited from expectations of Fed policy tightening, and the market may now begin to price in tighter Bank of England policy. Geopolitics is currently the only factor supporting the dollar.
If the Fed had not raised interest rates in September and signaled its readiness to continue tightening monetary policy, the US dollar would likely have started declining a month ago. That expectation remains in place. The pair has reversed in favor of the pound, and the remaining step is for bullish signals to form, allowing the bulls to open long positions. The pound's long-term outlook remains bullish.
Do the bears have any further prospects? Their scope appears limited. Over the past month and a half to two months, the bears seem to have achieved the seemingly impossible, pushing the dollar to levels that are exceptionally high by recent standards. It is worth remembering that the market had reasons to buy the dollar in recent weeks, but there were also reasons for the pound to rise that traders simply overlooked. A move in the opposite direction may now begin, and it could be much more consistent with the underlying market conditions than the previous decline.
There was no economic news affecting the pound on Thursday, while the US dollar failed to receive the support it needed for another advance from the GDP and inflation reports. In this view, the dollar has once again exhausted its upside potential. Unlike the euro, the pound may be poised for a sustained rise over the coming weeks. The market includes both bears and bulls. Inflation is high not only in the United States but also in the United Kingdom. The Bank of England is expected to begin tightening monetary policy next week, with a 90% probability.
The overall news background remains such that, over the long term, a decline in the US dollar is the only outcome expected. The war between Iran and the United States has not changed this outlook. Geopolitical developments led the market to focus on the dollar's safe-haven status for several months, but the conflict has already passed its most acute phase. The future direction of FOMC monetary policy remains uncertain, while the market continues to anticipate tightening, which is the main reason for the bears' optimism. However, traders still overlook the prospect of tighter Bank of England policy. Inflation in the United Kingdom is rising, as it is around the world, leaving the Bank of England with little choice but to raise rates as well.
On October 30, the economic calendar contains no significant releases. The economic news background is expected to have no impact on market sentiment on Friday.
The long-term outlook for the pound remains bullish. The bears have controlled the market in recent weeks, but the broader trading range, clearly visible on the daily chart, remains intact. The liquidity sweep below the swing low formed on May 1 triggered a decline within the horizontal range. However, liquidity was also taken from the June lows, allowing the bulls to regain control. Therefore, the short-term technical picture is now considered bullish.
For traders, this means that the coming period may favor holding existing long positions or opening new ones. Opportunities to do so may arise at imbalance 31 or the order block. The pound's targets are located near the upper boundary of the trading range at 1.3670.
