The GBP/USD pair experienced a moderate decline on Friday by the end of the day, though it was significantly weaker than the drop observed in EUR/USD. It's important to note that no macroeconomic reports were released in either the U.K. or the U.S. during the final trading day of the week. Market movement was primarily driven by politics, and there is no shortage of that at the moment.

Donald Trump remains committed to ending the war in Ukraine, recently calling it "the ninth war he will resolve." While some may struggle to count the prior eight, this theme fits within Trump's recurring narrative that, had he been in office, events such as the Russia–Ukraine war wouldn't have even begun.

However, market participants are currently less focused on Ukraine and far more concerned with Trump's global trade war and the increasingly dovish outlook for Federal Reserve policy. The trade war was discussed in detail in the EUR/USD analysis. Let's now revisit the situation at the Fed, which is becoming increasingly difficult.

Despite the Fed's outwardly dovish rhetoric, some segments of the market continue to push alternative narratives, even questioning the Fed's true intentions. At the beginning of this year, the Fed hinted at a maximum of two rate cuts in 2025—something supported by officials' statements and dot plot projections. Now, partly due to Trump's aggressive trade and immigration policies, labor market conditions are showing strain. As a result, the Fed has been forced to adopt a much more dovish tone than initially expected. One rate cut has already been implemented, and two additional reductions are likely before the year ends.

We believe that the Fed has turned more dovish overall, not less, despite what select analysts may claim. Moreover, it is incorrect to view the Fed's path in isolation. The ECB has completed its easing cycle, and the Bank of England is likely to pause indefinitely as inflation remains nearly double the 2% target. This leaves the Fed as the only major central bank expected to ease policy further—a far more significant factor than speculation over the "tone" of its trajectory.

By virtually any measure, the dollar remains under pressure. Of course, no one can predict the future with certainty. Market makers operate on their own timelines and may at times act contrary to logic or headline data. Therefore, we don't claim GBP/USD will rise endlessly in the coming years—but current conditions signal that further pound strength is far more likely than not.

The average volatility of the GBP/USD pair over the last five trading days is 78 pips, classified as "average" for this asset. On Monday, October 20, we expect the pair to trade within the range of 1.3346 to 1.3502. The long-term linear regression channel points upward, confirming a bullish trend. The CCI indicator has entered the oversold zone three times recently, strengthening the odds of a renewed upward move.

Nearest Support Levels:

S1 – 1.3428

S2 – 1.3367

S3 – 1.3306

Nearest Resistance Levels:

R1 – 1.3489

R2 – 1.3550

R3 – 1.3611

Trading Recommendations:

GBP/USD is attempting to resume its 2025 bullish trend, and the pair's long-term outlook remains intact. Trump's policies will continue to weigh on the dollar, so we are not anticipating an extended recovery for the U.S. currency. As a result, long positions with targets at 1.3672 and 1.3733 remain preferable as long as the price holds above the moving average.

If the price falls below the moving average, technical setups would support short positions targeting 1.3306 and 1.3245. The dollar may continue to post minor corrections, but a sustained bullish reversal will require resolution of the trade war or another broadly positive shift in global risk sentiment and economic fundamentals.

Explanation of Chart Elements:

• Linear regression channels help identify the current trend direction. If both channels point in the same direction, the trend is considered strong.
• The moving average line (20,0, smoothed) defines the short-term trend and the preferable direction for trading.
• Murray levels represent projected support/resistance zones for trend continuation or correction.
• Volatility levels (red lines) suggest the expected price range for the next 24 hours based on current volatility measures.
• CCI indicator: values below –250 (oversold) or above +250 (overbought) signal a potential reversal or trend shift.