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The wave pattern of GBP/USD remains quite complex and ambiguous. A successful attempt to break through the 50.0% Fibonacci level in April indicated the market's readiness to form a downward wave 3 or c. Still, since then, we have only seen an upward movement. If this wave resumes formation, the wave pattern will become much simpler, and the risk of a complex wave structure will disappear. However, the pair has remained the same in recent weeks, raising doubts about the market's readiness for sales.
In the current situation, my readers can still count on wave 3 or c formation, with targets located below the low of wave 1 or a, at 1.2035. Therefore, the pound should decrease at least 700-800 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 five months to form, and it was only a corrective wave. The last corrective wave was very extended, but the unsuccessful attempt to break through the 1.2822 level again allows us to look downward.
The pound's decline is slow, but the market has plenty of time.
The GBP/USD exchange rate increased by 15 basis points on Friday, but the movement in recent days and weeks has been almost identical to that of the EUR/USD. The demand for the British currency is decreasing very slowly. Still, this week, the market was unable to successfully break through the 1.2627 level, which blocks further dollar strengthening and the pair's decline. The news background this week was weak, even in the UK, meaning there were hardly any important reports. The first report of the week was the UK's GDP for the first quarter, released this morning. The British economy grew by 0.7% in the first quarter, 0.1% more than the market expected. Consequently, the increase in demand for the pound on Friday morning was quite justified.
Yesterday, the decline in demand for the US currency was also justified. The US GDP accelerated in the first quarter but only compared to the second estimate (1.4% against 1.3%). Compared to the previous quarter, it slowed down by 1.9% on a quarterly basis. Therefore, expecting the strengthening of the US dollar yesterday was naive. However, as I mentioned earlier, all reports this week had no chance of significantly influencing market sentiment. Next week will be decisive for both pairs, and I expect a resumption of the decline for both the euro and the pound.
The wave structure of the GBP/USD pair still suggests a decline. At this time, I am still considering selling the pair with targets below the 1.2039 mark, as wave 3 or C has not yet been canceled. Since the pair formed a reversal around the 1.2822 mark and near the peak of the supposed wave 2 or B, sales of the pair can be considered with initial targets around the 1.2315 mark. However, proceed cautiously, as confidence in the market sentiment turning "bearish" will come after a successful attempt to break the 1.2627 mark.
The wave structure is even more eloquent on a larger wave scale. The downward corrective section of the trend continues to form, and its second wave has become quite extensive—76.4% of the first wave. An unsuccessful attempt to break this mark might have led to the start of wave 3 or C, but currently, a corrective wave is forming.
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