12.09.202418:06 Forex Analysis & Reviews: Analysis for GBP/USD on September 12, 2024

The wave pattern for GBP/USD remains quite complex and uncertain. For some time, the wave structure appeared convincing and suggested a downward set of waves targeting levels below 1.2300. However, in practice, demand for the U.S. dollar increased too much for this scenario to materialize, and this demand continues to grow.

Currently, the wave pattern has become very complicated. I remind you that in my analysis, I try to use simple structures because complex ones have too many nuances and dualities. We have now seen another upward wave, which caused GBP/USD to break out of the triangle. The current upward wave structure, which presumably started around April 22, may extend further, as the market doesn't seem ready to fully price in all stages of the Fed's rate cuts just yet. A three-wave corrective structure is emerging again, and a successful breakout above the 1.3142 level, corresponding to 100% Fibonacci, suggests the market is ready for at least a slight decline.

And the pound experienced two quiet days. The GBP/USD rate increased slightly on Thursday. It is likely that we wouldn't have seen even this slight increase if not for the ECB meeting. Notably, the decision to lower three interest rates and Christine Lagarde's press conference did not provoke much reaction, even in the euro. Nevertheless, the market seized the opportunity to buy the pound. However, it remains unclear to me on what basis this opportunity was taken. The ECB lowered all three rates, two of them by more than 25 basis points. If this is a reason to buy the euro and pound, then the upward trend may last for a long time.

Yesterday and the day before, several significant reports were published in the UK. I would highlight the GDP report for July, which was expected to grow by 0.2%, but the UK economy showed no growth. I would also note the industrial production report for the same July period, which was expected to grow by 0.8%, but production volumes decreased. The British economy continues to struggle with weak production, and the Bank of England, instead of focusing on inflation (which has already fallen to the target level), needs to concentrate on the overall economy. There were also some positive moments – the unemployment rate fell, and the number of unemployed was lower than expected. However, forex market participants didn't consider either of these pieces of information as significant. The pound may continue to decline, but the wave pattern increasingly suggests that the upward trend could extend further and become more complicated.

General Conclusions:

The wave structure for GBP/USD still suggests a decline. If the upward trend started on April 22, it has already taken a five-wave form. Therefore, a three-wave correction should be expected. In my opinion, selling the pair with targets around the 1.2900 level and lower should be considered. However, the 1.3142 level has already been breached once by sellers. The upward wave pattern may continue to become more complicated given the current news background. Nonetheless, I expect the correction to continue.

On a larger wave scale, the wave structure has transformed. We can now assume the formation of a complex and extended upward correction structure. At the moment, this is a three-wave pattern, but it may develop into a five-wave structure, which could take several more months or even longer to complete.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often change.
2. If you are uncertain about market conditions, it's better not to enter the market.
3. Absolute certainty in the direction of movement is never possible. Do not forget about protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.