GBP/USD Price Forecast: Extends recovery to near 20-EMA amid risk-on mood

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The GBP/USD pair is up 0.35% to near 1.3480 during the Asian trading session on Monday. The Cable trades firmly as market sentiment for riskier assets has improved significantly due to increased hopes of a deal between the United States (US) and Iran.

GBP/USD jumps to near 1.3480 as hopes of the US-Iran deal have improved market sentiment.
US President Trump said the final agreement with Iran is largely negotiated.
Oil prices have declined sharply on US-Iran deal hopes.

In the Asian trade, S&P 500 futures jump 0.85% to near 7,540, reflecting strong investors’ appetite for risk-sensitive assets. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% lower to near 99.00.

Over the weekend, US President Donald Trump said in a post on Truth Social that an agreement with Iran has been “largely negotiated”, which will direct Tehran to reopen the Strait of Hormuz with other key elements, and final details of the deal are currently being discussed. Later, Trump also said in another post on the same platform that negotiations from Washington need not rush for any deal.

Improving hopes of the reopening of the Strait of Hormuz have resulted in a sharp decline in oil prices, which has also forced traders to pare some hawkish Federal Reserve (Fed) bets for the year.

GBP/USD technical analysis

GBP/USD trades higher at around 1.3480 as of writing. The pair extends recovery to near the 20-day exponential moving average (EMA) at 1.3472, which indicates that the near-term tone has slightly become constructive.

The broader downward resistance trend line, with a break point near 1.3612, still caps the medium-term structure overhead, while the Relative Strength Index (14) around 50 hints at neutral momentum after the recent recovery from lower levels.

On the downside, the May 22 low at 1.3413 is the major support zone; a daily close below this level would expose a deeper pullback toward the May 20 low at 1.3375. On the topside, initial resistance is defined by the downward resistance trend line break area around 1.3612, and only a clear move above this barrier would suggest that bulls are gaining enough traction to extend the advance toward 1.3700.

(The technical analysis of this story was written with the help of an AI tool.)

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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