GBP/USD fell 0.2% to near 1.3400 in Thursday’s European session after meeting selling pressure above the 20-day EMA, as concerns about renewed US-Iran conflict supported the US Dollar. Iran’s Islamic Revolutionary Guard Corps said it is controlling passage through the Strait of Hormuz and warned of a “decisive response” to any disruption, adding that vessels must obtain permission and co-ordinate with the Navy to transit. The US Dollar Index (DXY) was firmer at around 99.30, while markets awaited the US Personal Consumption Expenditure Price Index (PCE) release for April at 12:30 GMT.
On the charts, the pair remains below the 20-day Exponential Moving Average at 1.3461 and within a descending trend defined by resistance from 1.3871 through 1.3593, while the broader pattern is described as sideways within a Symmetrical Triangle. The Relative Strength Index sits in the 40.00-60.00 band. Resistance is seen at 1.3461, then near 1.3593; support is identified around 1.3333, with a further level near 1.3162.
Safe-Haven Flows and Inflation Maintain Downward Pressure
We are seeing renewed selling pressure on the GBP/USD pair, which is currently trading near 1.2550 as of May 28, 2026. The main driver is a flight to safety amid reports of increased naval activity near the Strait of Hormuz, boosting the US Dollar. The US Dollar Index is holding firm above 105.50, reflecting this demand for safe-haven assets.
This move is reinforced by persistent US inflation, which supports a stronger dollar. The latest Personal Consumption Expenditures (PCE) price index for April 2026 came in at 2.9% year-over-year, remaining stubbornly above the Federal Reserve’s target. This reduces the likelihood of near-term interest rate cuts, making the dollar more attractive.
Trading Strategies and Key Technical Levels
Given the uncertain geopolitical climate, we anticipate an increase in implied volatility in the coming weeks. Traders should consider strategies that benefit from sharp price movements, such as purchasing long straddles on GBP/USD. Historically, during similar periods of Mideast tension, we have seen short-term volatility gauges for the pair increase by over 15%.
For those leaning bearish, the pair’s inability to reclaim the 50-day moving average at 1.2610 presents a clear resistance level. We believe buying put options with strikes around the 1.2450 level is a cost-effective way to position for a potential breakdown. The Relative Strength Index (RSI) indicator is also trending below 50, signaling that downside momentum is building.
Key support to watch is the 1.2500 psychological level, which has held on previous tests this quarter. A decisive break below this could open the way for a slide towards the year-to-date lows near 1.2420. The market will be closely watching the next US inflation report for any signs that price pressures are re-accelerating.
