The GBP/USD currency pair continues to maintain a downward trend on the 4-hour timeframe, having collapsed anew on Tuesday. As mentioned yesterday, the upward retracement of the pair on Monday evening should not mislead traders. Any retracement now is simply a pullback before a new drop. Over the weekend, we questioned the rise in the US dollar, but it should be understood that the dollar is not rising due to the war in the Middle East. It is rising due to the war's consequences worldwide.

It can already be said that the peaceful and prosperous life in the UAE, Bahrain, or Kuwait has been put on hold. Iran is even striking at the Burj Khalifa. Therefore, millionaires and billionaires are currently fleeing from Middle Eastern countries where they have invested their wealth over the past few years. Saudi Arabia, meanwhile, intends to conduct a military operation in Lebanon, and the entire conflict in the Middle East is beginning to take on a "wall against wall" appearance. No one could have foreseen (although it is generally quite logical and inevitable) that Iran would close the Strait of Hormuz or start delivering destructive strikes on oil and gas facilities in the region, leading to their complete shutdown and, consequently, a sharp rise in energy prices worldwide. In our view, the dollar's rise is primarily due to panic and chaos in the commodity and raw materials markets, rather than to another escalation in the Middle Eastern conflict.

As for the British pound, it rose against the American currency throughout 2025 simply because Donald Trump's policies instilled a strong desire among investors to distance themselves from everything American. In other words, the British pound has become a hostage to circumstances. It strengthened significantly, not because the British economy was showing astonishing results, but because the dollar was falling.

However, in 2026, the situation has reversed. Now the British pound is falling solely because the dollar is rising. Once the war in the Middle East began, which has already affected more than 10 countries in one way or another, it became clear that the market still only trusts the US dollar in the face of complex geopolitical times. Thus, in the context of a peaceful life amid Trump's protectionist policies, investors found alternative instruments and currencies for investment and capital preservation. When the "smell of trouble" arose, the market immediately turned to the most familiar and time-tested option—transferring funds into the American currency.

The only question that remains is how long the strengthening of the US dollar will last, given geopolitical factors. This question, as the one answered a week ago about "What specific actions to expect from Iran or the US?" cannot be answered. Iran may continue to strike at refineries and other energy infrastructure, and Iran still possesses a nuclear arsenal. Israeli and US strikes have already resulted in the deaths of around 50 high-ranking Iranian officials, which has had no impact on the country's policies. Thus, everything will depend on the market itself. The dollar may continue to rise for some time, or it may end its rise today.

The average volatility of the GBP/USD pair over the last 5 trading days is 121 pips. For the pound/dollar pair, this value is considered "average." On Wednesday, March 4, we thus expect movement within a range limited by the levels of 1.3183 and 1.3425. The upper channel of the linear regression is directed upwards, indicating a trend recovery. The CCI indicator has once again entered oversold territory, signaling a potential end to the correction.

Nearest support levels:

S1 – 1.3306

S2 – 1.3184

S3 – 1.3062

Nearest resistance levels:

R1 – 1.3428

R2 – 1.3550

R3 – 1.3672

Trading Recommendations:

The GBP/USD pair has been in correction for a whole month now, but its long-term prospects have not changed. Trump's policies will continue to exert pressure on the US economy, so we do not expect the US currency to grow in 2026. Even its status as a "reserve currency" no longer plays a key role for traders. Thus, long positions targeting 1.3916 and higher remain relevant as long as the price is above the moving average. If the price is below the moving average, small short positions can be considered with a target of 1.3184 based on technical (correctional) grounds. In recent weeks, almost all news and events have turned against the British pound, prolonging the correction.

Explanations for Illustrations:

• The linear regression channels help determine the current trend. If both are directed in the same way, then the trend is strong.
• The moving average line (settings: 20.0, smoothed) indicates the short-term trend and trading direction.
• Murray levels are target levels for movements and corrections.
• Volatility levels (red lines) indicate the probable price channel in which the pair will move over the next day, based on current volatility indicators.
• The CCI indicator's entry into the oversold area (below -250) or the overbought area (above +250) indicates an impending reversal of the trend in the opposite direction.