As we move through the two sessions, the GBPUSD pair is set for a modestly bullish ride, with traders eyeing a return to the 1.3500 hurdle as their main objective. What’s driving it? A clear shift in market sentiment, fueled by geopolitical easing and growing anticipation of policy cues from both the Federal Reserve (Fed) and the Bank of England (BoE).
To begin with, risk-on is now back in full swing. The US-Iran deal lit a fire under stocks—S&P 500 futures surged by more than 1%—while the dollar index (DXY) slid to 99.40, losing its safe-haven luster.
Meanwhile, the retail crowd is leaning the wrong way. According to Myfxbook, about 58% of traders are short on the pound. In a rising market, this is often a contrarian green light. Why? As bears get squeezed, their Stop Losses get triggered, adding rocket fuel to the upside.
And smart money is starting to shift gears. The latest Commitment of Traders (COT) report shows that large speculators have trimmed their net short pound positions by 19,000 contracts during the reporting week. This is a telltale sign that institutional investors are taking profits and laying the groundwork for a potential reversal. For context, June futures are currently trading near 1.3415.
On the technical front, all eyes are on a few key levels:
Resistance. The critical line in the sand is 1.3425, a daily “double top”. A clean break above this threshold on the hourly chart could open the floodgates to 1.3550.
Support. The main demand zone stands between 1.3350 and 1.3370. Here, buyers are defending their turf ahead of the central bank meetings.
Now, let’s examine the options landscape. Open interest (OI) for June contracts (with expiration just around the corner) reveals some key barriers:
Call barriers (resistance). Large blocks of strikes are stacked at 1.3450 and 1.3500. These levels are likely to prompt longs to take profits.
Put barriers (support). The heaviest OI concentration sits at 1.3350 and below, at 1.3300. Any dip toward these thresholds is poised to encounter buying interest from hedgers.
Maximum pain. The calculated level where option buyers suffer the most is currently around 1.3400. Prices tend to gravitate toward this zone ahead of major events, and this week is no exception.
Putting it all together, expect choppy, upward-biased action over the next couple of sessions. If the positive sentiment from the US-Iran deal holds, GBPUSD will likely attempt to reach 1.3425. A decisive break above this level could send the pair to 1.3500 by Wednesday evening, just before the Federal Reserve takes center stage.
The ultimate recommendation is to buy GBPUSD. Lock in profits at 1.3500. Place Stop Loss at 1.3300.
Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow you to enter a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.
