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The wave pattern for 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, but since then, we have only seen an increase. If this wave resumes its formation, the wave pattern will become much simpler, and the threat of wave pattern complication will disappear. However, in recent weeks, the decline has been quite weak, and sellers have not been able to make a successful attempt to break even the nearest 38.2% Fibonacci level.
In the current situation, my readers can still expect the formation of wave 3 or c, with targets below the low of wave 1 or a, at 1.2035. Consequently, the pound should drop another 700-800 basis points from the current levels. The formation of the entire wave 3 or c may take a long time. Wave 2 or b took 5 months to form, and it was only a corrective wave. The last corrective wave 2 or b in wave 3 or c turned out to be very prolonged, but the unsuccessful attempt to break through the 1.2822 mark allows us to look downward again.
After a series of unsuccessful attempts to break through the 1.2627 mark, the pound is rising again
The GBP/USD pair increased by 60 basis points on Wednesday. The American reports, two of which (the most important ones) showed values below market expectations, were partly to blame. The most disappointing was the ISM services PMI. The market expected its value to decrease by 1-1.5 points, but it actually lost 5 points, falling below 50.0. This report was the main reason for the dollar's fall on Wednesday.
The second reason is the unsuccessful attempt to break through the 1.2627 mark. Over the past week, I have repeatedly mentioned the significance of this mark. As we can see, sellers could not break through this barrier. Demand for the pound is rising not because the US economy is weak or shows a strongly negative trend but because sellers cannot oppose the buyers. This situation has been observed for a long time.
On Wednesday evening, the FOMC minutes from the June 16-17 meeting were released, confirming the idea of maintaining the rate at its peak level for a longer time. FOMC members still do not see enough evidence that inflation is moving toward the target. These minutes could have supported demand for the US currency, but what can be done if sellers cannot even break through the 1.2627 mark?
General Conclusions
The wave pattern for GBP/USD still suggests a decline. I continue to consider selling the instrument with targets below 1.2039, as wave 3 or c has not yet been canceled. Since the instrument reversed around 1.2822 and not far from the peak of the supposed wave 2 or b, sales can be considered with initial targets around 1.2315. However, be very cautious, as confidence in a market sentiment shift to "bearish" will come after a successful attempt to break through the 1.2627 mark.
The wave pattern is even more telling on a larger wave scale. The downward corrective section of the trend continues to form, and its second wave has extended to 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 currently, a corrective wave is being formed.
Key Principles of My Analysis:
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