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The wave analysis for the GBP/USD pair remains quite complex. A successful attempt to break through the 50.0% Fibonacci level in April indicated the market's readiness to build a downward wave 3 or C. If this wave continues its construction, the wave pattern will become much simpler, and the threat of complicating the wave analysis will disappear. However, in recent weeks, the pair has remained the same, raising doubts about the market's readiness for sales. However, the downward wave 3 or C could be very prolonged, like all the previous waves of the current still descending trend segment.
In the current situation, my readers can still expect the construction of wave 3 or C, the targets of which are located below the low of wave 1 or A at the 1.2035 mark. Therefore, the British pound should decline by at least 600-700 basis points from the current levels. With such a decline, wave 3 or C will be relatively small, so I expect a much greater decline in quotes. It may take a lot of time to build the entire wave 3 or C. Wave 2 or B took 5 months to build, and that was only a corrective wave. An impulse wave may take even more time.
Demand for the pound started to decline, but for how long?
The GBP/USD pair rate decreased by 95 basis points on Wednesday and by 30 when writing the review on Thursday. It can be assumed that a long-awaited and protracted decline of the British pound has begun because I cannot imagine what other reasons the market could use for buying the pair. At the moment, all the recent increase in quotes looks like a classic three-wave, corrective structure. If this is the case, we can expect a new, prolonged decline of the British pound, corresponding to the news background. Unlike the market, I notice negative news from the US and positive news from the UK. Just this week, two FOMC members, one of whom is Jerome Powell, stated that the market should not expect monetary policy easing soon. At the same time, Mr. Bailey, the Governor of the Bank of England, literally a week ago said that he does not completely rule out the possibility of lowering interest rates even in June. We get a classic scenario where the market expects easing from the Fed while the ECB and the Bank of England will lower rates. The market has been pushing the British pound up for several weeks, but it is becoming increasingly difficult as there are no more reasons for growth.
Today, economic statistics in the US again turned out to be weaker than market expectations, but the reports were not the most important, so the market decided to overlook them. Yesterday's inflation report worked out, considering today's weak statistics. Either way, I expect a resumption of the construction of the downward trend segment.
General conclusions.
The wave pattern of the GBP/USD pair still suggests a decline. At the moment, I am still considering selling the pair with targets located below the 1.2039 mark, as wave 3 or C has not yet been canceled. A successful attempt to break through the 1.2625 mark, which is equivalent to 38.2% according to Fibonacci, from the top will indicate a possible completion of the internal, corrective wave within 3 or C, which currently looks like a classic three-wave.
On the larger wave scale, the wave pattern is even more eloquent. The descending corrective trend segment continues its construction, and its second wave has taken on an extended form - to 76.4% of the first wave. An unsuccessful attempt to break this mark could have led to the beginning of the construction of 3 or C, but currently, a corrective wave is being built.
The main principles of my analysis:
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