10.07.202417:06 Forex Analysis & Reviews: Analysis of GBP/USD pair on July 10th. US inflation report will clarify this week

The wave pattern for GBP/USD remains quite complex and ambiguous. Around the 1.2822 mark, corresponding to 23.6% Fibonacci and near the peak of the supposed wave 2 or b, a downward wave began to form several weeks ago. I initially thought this was the long-awaited wave 3 or c, but the unsuccessful attempt to break through the 1.2627 mark (equivalent to 38.2% Fibonacci) pushed the pair back to the past year's highs. The entire wave structure is at risk of transformation again, but I cannot assert that this will be an upward trend. Regardless of how the pound behaves, it lacks medium-term growth potential. The dollar has regularly come under pressure in recent months due to American reports. If these reports had not occasionally failed, we might have already seen the pair below the 1.2600 figure.

At present, wave 3 or c can continue its formation. Another unsuccessful attempt to break through the 1.2822 mark, paired with the MACD divergence, may lead to the completion of the corrective wave. A successful attempt to break the peaks of June 12 and March 8 will require adjusting the wave structure.

The Pound Returns to the 1.2822 Mark Again

The GBP/USD rate increased by 20 basis points on Wednesday and decreased by 17 yesterday. Frankly, the movements of the pound are becoming quite frustrating as the wave pattern is becoming increasingly complex, market activity is very low, and the daily movement amplitude is nearly zero. Thus, all conditions for not trading and going on vacation have been met. The market itself needs to know what it wants. For the fifth or sixth time, the pound has returned to the 1.2822 mark and is again attempting to form a downward wave. Macroeconomic data from the US repeatedly prevent sellers from taking action. When there is no negative news from the US, sellers rest. When the dollar has a chance to gain in price, it doesn't take it. When it doesn't, it falls but doesn't go above the 1.2822 mark. The situation is very strange.

The US inflation report will be released tomorrow, which could serve as a starting point for a new movement. If the market believes that US inflation is slowing at a good pace, demand for the US currency will continue to decline, the 1.2822 mark will be overcome, and the entire wave pattern will have to be transformed into a more complex and hard-to-read structure. If the market believes that it has sold the dollar long enough and that US inflation is still slowing very slowly, the pair will be able to form at least one of the downward waves that it should have formed long ago.

General Conclusions

The wave pattern for GBP/USD still suggests a decline but remains ambiguous. I am still considering selling the pair with targets below the 1.2039 mark, as wave 3 or c has not yet been canceled. Around the 1.2822 mark and near the peak of the supposed wave 2 or b, a new reversal may occur, which will again allow for the expectation of a decline in the pound. However, there is no confidence in the market's sentiment turning "bearish." A successful attempt to break through the 1.2822 mark will put the current wave pattern on the brink of cancellation.

At the higher wave scale, the wave pattern is even more eloquent. The downward corrective section of the trend continues its formation, and its second wave has become extended—76.4% of the first wave. An unsuccessful attempt to break through this mark could lead to the beginning of wave 3 or c, but a corrective wave is currently forming.

Key Principles of My Analysis

1. Wave structures should be simple and understandable. Complex structures are difficult to play out and often change.
2. If there is confidence in what is happening in the market, it is better to avoid entering it.
3. There is never 100% certainty in the direction of movement. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.