The GBP/USD currency pair continues to maintain a downward trend on the 4-hour timeframe, and on Wednesday, it made a slight correction against the recent collapse. To be honest, the British pound feels like the biggest loser at the start of 2026, despite having reached a four-year high in January. However, within just one month, the British currency has already lost about 500 pips. One could even say that it is quite deserved. It all started with the then-possible conflict in Iran and the Bank of England meeting, where the decision was made to keep the interest rate unchanged, but the decision turned out to be "borderline," something the market did not expect. Since then, the pound has only been falling, and a series of UK data has only convinced traders that the Bank of England will move toward easing at the next meeting. Recall that the unemployment rate has risen, inflation has slowed to 3%, and GDP growth remains minimal.

Thus, it may seem that the British pound has been falling completely predictably all this time. The final collapse began last Thursday when negotiations between Iran and the US in Geneva failed. At that time, we stated that a war between Iran and the US was inevitable, but the market was prepared for it, at least two weeks in advance. So why did the dollar keep rising?

Because no one expected Iran to respond so strongly or on such a scale. In the first days of the confrontation, it became clear that Iran has enough missiles to target American ships in the Persian Gulf, Israel, Qatar, and all US allies in the region. Thus, while US allies bomb Iran, Iran, instead of collapsing, retaliates against all who attack it. Leaders in Iran change roughly after each American strike, but the fact that new "leaders" emerge on the scene, declaring the preservation of the political course, speaks volumes. In simple terms, Iran is ready to fight to the last Iranian. The population of Iran exceeds 80 million people, and the country ranks 17th in the world by land area. This territory is extremely difficult for ground operations.

The first few days of the war showed that US allies could bomb Iran as much as they wanted, and little would change as a result. Interestingly, Trump has tried several times to secure the placement of military bases in European countries. Guess where the next Iranian missiles would fly if the UK or Spain allowed Trump to station American troops on their territory? Perhaps that is what Trump wants—to involve as many countries as possible in the conflict, so that it is not only America fighting against Iran. This seems quite plausible given the methods of the Republican president. By the way, the US national debt increased by $100 billion in just a few days of military action. In our view, the dollar may remain the main beneficiary of the war in Iran for some time, but its future remains uncertain and grim.

The average volatility of the GBP/USD pair over the last 5 trading days is 125 pips. For the pound/dollar pair, this value is considered "average." On Thursday, March 5, we thus expect movement within a range limited by the levels of 1.3239 and 1.3489. The upper channel of the linear regression is directed upward, 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. Donald 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, short positions can be considered with a target of 1.3239 based on technical (correctional) grounds. In recent weeks, nearly all news and events have turned against the British pound, contributing to the prolonged nature of the correction.

Explanations for Illustrations:

• Linear regression channels help determine the current trend. If both are directed the same way, the trend is strong.
• The moving average line (settings 20,0, smoothed) indicates the short-term trend and direction for trading.
• 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 metrics.
• The CCI indicator entering the oversold area (below -250) or the overbought area (above +250) indicates an impending reversal of the trend in the opposite direction.