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The wave analysis for the GBP/USD pair remains quite complex. A successful attempt to break through the Fibonacci level of 50.0% indicated the market's readiness to form a downward wave 3 or C. If this wave indeed continues to develop, the wave pattern will become much simpler, and the threat of complicating the wave analysis will disappear.
As I have already noted, the wave pattern should be simple and understandable to work with. There has been little simplicity and understanding in recent months. For a long time, the pair was sideways, and only now is there a possibility of building a downward impulse wave.
In the current situation, my readers can expect the formation of wave 3 or C, the targets of which are below the low of wave 1 or A. Therefore, the pound should decline by at least another 500–600 basis points from the current levels. With such a decline, wave 3 or C will be relatively small, and I expect a much larger drop in quotes. After breaking through the level of 1.2469 (50.0% Fibonacci), sellers have removed the psychological barrier, but the recent US reports have caused sellers to pause until better times.
The level of 1.2470 prevents the pound from further decline.
The GBP/USD pair declined by 30 basis points during Wednesday's trading. This is not much, but it's something. Demand for the pound has been decreasing for over a month, which fully corresponds to the current wave pattern, which assumes the formation of an impulsive wave 3 or C. A successful attempt to break through the level of 1.2470, which corresponds to 50.0% Fibonacci, will indicate the market's readiness for new sales of the pair. However, today, sellers need more confidence in their actions, as the Bank of England meeting is scheduled for tomorrow. And it's hard to say how it will end.
Undoubtedly, there are always several basic scenarios, but they are all closely related. In other words, tomorrow from the Bank of England, one can expect words about readiness to start lowering interest rates in the coming months. But since the Bank of England has several months left, it may not mention a possible rate cut at all. In the first case, the market will have grounds for new sales, and in the second case, for purchases, although, in essence, the regulator's sentiment will not differ in both scenarios. Words about satisfactory inflation reduction may also be heard, or about high inflation at the moment. The market's reaction will again be different.
That's why I don't try to predict the outcome of the meeting. Over the next few months, the pound should continue to decline, just like the euro. The nearest target is the 1.23 figure, but even near it, the impulsive wave will not take on a completed form. The minimum target for the pair's decline is the level of 1.2030.
General conclusions.
The wave pattern of the GBP/USD pair still suggests a decline. At this time, I still consider selling the pair with targets below the 1.2039 mark, as wave 3 or C is continuing to form. A successful attempt to break through the 1.2472 level, which corresponds to 50.0% Fibonacci, indicates the long-awaited readiness of the market to form a downward wave. An unsuccessful attempt to break through the 1.2625 level, which equates to 38.2% Fibonacci, will indicate the completion of the internal corrective wave as part of 3 or C.
On the larger wave scale, the wave pattern is even more eloquent. The downward corrective section of the trend continues to form, and its second wave has acquired an extended form - at 76.4% of the first wave. An unsuccessful attempt to break through this level could have led to the beginning of the formation of 3 or C, but at this time, a corrective wave is being formed.
The main principles of my analysis:
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