27.05.202416:58 Forex Analysis & Reviews: Analysis of GBP/USD pair on May 27, 2024

The wave analysis for the GBP/USD remains quite complex. A successful attempt to break the 50.0% Fibonacci level in April indicated the market's readiness to form a downward wave 3 or c. If this wave continues to develop, the wave pattern will become much simpler, and the threat of complicating the wave count will disappear. However, in recent weeks, the pair has remained the same, raising doubts about the market's readiness for sales. The downward wave 3 or c could be quite extensive, like all the previous waves of the current downtrend.

In the current situation, my readers can still count on the formation 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 pound should decrease by at least 600-700 basis points from current levels. With such a decline, wave 3 or c will be relatively small, so I expect a much larger drop 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 form, and that was just a corrective wave. Building an impulse wave may take even more time.

Only a retreat by buyers will save the dollar.

The GBP/USD pair rose by 15 basis points on Monday. The range of movements today was very weak and did not exceed 10 points during the day. Despite the absence of news background on Monday, the market again slightly increased demand for the British pound. The formation of the upward wave continues, and with each passing day, the probability increases that the current wave count will transform. In what state – is still unclear.

The British pound continues to enjoy demand in the market for unknown reasons. After inflation in the UK dropped almost to the target level, the chances of seeing the first interest rate cut by the Bank of England this summer increased. I remind you that earlier, the market believed for a long time that the Fed would start easing first and the Bank of England would start cutting rates much later. The reality turned out to be quite different. There are no reasons for the pound to continue rising, even though the corrective wave is already taking on a form that is too extended. Even if we assume that the current rise in quotes is already a new, independent trend section, it is extremely difficult to understand what factors could push the pair up for another six months or a year. After all, a new trend section can last up to two months.

Based on the above, I am even more inclined to the scenario in which the entire wave pattern will become unreadable without a clear upward or downward direction.

General Conclusions

The wave pattern of the GBP/USD pair still suggests a decline. Currently, I still consider selling the pair with targets below the 1.2039 mark, as I believe that wave 3 or c has not been canceled yet. A successful attempt to break the 1.2625 mark, equivalent to 38.2% according to Fibonacci, will indicate the possible completion of the internal, corrective wave within 3 or c, which looks like a classic three-wave structure.

On a larger wave scale, the wave pattern is even more eloquent. The descending corrective section of the trend continues to develop, and its second wave has acquired an extended form – to 76.4% of the first wave. An unsuccessful attempt to break this mark could have led to the start of building wave 3 or c, but a corrective wave is currently being formed.

Key principles of my analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play, and they often bring changes.
2. If one has invested in the market's performance, it is better not to enter because the direction of movement is never 100% certain. Remember about protective Stop-Loss orders.
3. Wave analysis can be combined with other types of analysis and trading strategies.