Analysis for GBP/USD on May 18th. The Bank of England is close to the peak rate
May 18, 2023 5:22 pm
The wave analysis for the GBP/USD pair still looks complex and ambiguous because it doesn’t look like a classic correctional or impulse segment of the trend. Since the peak of the current bullish wave went beyond the peak of the last b wave, the entire bearish trend segment, consisting of waves a-b-c, can be considered complete. Therefore, a new bullish trend segment is being built for the pound. Since March 8, I can highlight only one wave of the current scale, so there is every reason to assume that the formation of a new segment of the trend will take a long time.
Both pairs should build similar wave formations. If this is indeed the case, then wave 2 or b for the pound may be extended, and at the same time, a downward three-wave structure may be built for the euro. Thus, I expect a deep b wave, as with the formation of the previous three waves. Therefore, a decrease in the pair can be expected at 1.1850 or slightly higher. At the moment, wave 1 or a has every chance to be considered completed, but some things could still be improved.
More and more “dovish” signals
The GBP/USD rate dropped 80 basis points on Thursday. Demand for the British currency was falling all day, and the successful attempt to break through the 100.0% Fibonacci level still indicates the market’s readiness to sell the pair. The decline in quotations may continue in the second wave. From Thursday’s news background, I can only highlight things. There were no interesting reports in the UK today, and American reports could only slightly increase the demand for the US currency. However, the dollar has been rising in price since the start of the day, which corresponds to the current wave picture.
As I have said, the market has long and persistently played out the increase in the Bank of England rate in advance. Now more and more hidden signals are coming from the British regulator that it is not worth counting on a strong tightening. Economists at ING believe there are 40 basis points left to the peak rate level, corresponding to 1-2 rate hikes. The market had not already considered this change, so it started to exit purchases. Based on this, demand for the Briton may continue to decline.
The British statistics of the last few weeks could have been more pleasing. The unemployment rate has risen, the number of claims for unemployment benefits has also risen, inflation continues to fall very slowly, and the economy is not growing. Andrew Bailey could have supported the pound earlier in the day, but his speech had no “hawkish” expressions. The same can be said about today’s Dave Ramsden and Ben Broadbent speeches.
General conclusions
The wave pattern of the GBP/USD pair has long suggested the formation of a new downward wave. The wave b can be very deep, as all recent waves are approximately equal. The first wave of the ascending segment can become even more complicated. The unsuccessful attempt to break through the 1.2615 mark, which corresponds to 127.2% according to Fibonacci, indicates the market’s readiness for sales, and the successful attempt to break through the 1.2445 mark, which is equivalent to 100.0% according to Fibonacci, repeats this signal.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are also some differences. The downward correctional segment of the trend is complete, but at this time, the formation of a downward wave may begin. And this wave can be deep and extended, and the entire trend segment – horizontal, like the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
The wave analysis for the GBP/USD pair still looks complex and ambiguous because it doesn’t look like a classic correctional or impulse segment of the trend. Since the peak of the current bullish wave went beyond the peak of the last b wave, the entire bearish trend segment, consisting of waves a-b-c, can be considered complete. Therefore, a new bullish trend segment is being built for the pound. Since March 8, I can highlight only one wave of the current scale, so there is every reason to assume that the formation of a new segment of the trend will take a long time.
Both pairs should build similar wave formations. If this is indeed the case, then wave 2 or b for the pound may be extended, and at the same time, a downward three-wave structure may be built for the euro. Thus, I expect a deep b wave, as with the formation of the previous three waves. Therefore, a decrease in the pair can be expected at 1.1850 or slightly higher. At the moment, wave 1 or a has every chance to be considered completed, but some things could still be improved.
More and more “dovish” signals
The GBP/USD rate dropped 80 basis points on Thursday. Demand for the British currency was falling all day, and the successful attempt to break through the 100.0% Fibonacci level still indicates the market’s readiness to sell the pair. The decline in quotations may continue in the second wave. From Thursday’s news background, I can only highlight things. There were no interesting reports in the UK today, and American reports could only slightly increase the demand for the US currency. However, the dollar has been rising in price since the start of the day, which corresponds to the current wave picture.
As I have said, the market has long and persistently played out the increase in the Bank of England rate in advance. Now more and more hidden signals are coming from the British regulator that it is not worth counting on a strong tightening. Economists at ING believe there are 40 basis points left to the peak rate level, corresponding to 1-2 rate hikes. The market had not already considered this change, so it started to exit purchases. Based on this, demand for the Briton may continue to decline.
The British statistics of the last few weeks could have been more pleasing. The unemployment rate has risen, the number of claims for unemployment benefits has also risen, inflation continues to fall very slowly, and the economy is not growing. Andrew Bailey could have supported the pound earlier in the day, but his speech had no “hawkish” expressions. The same can be said about today’s Dave Ramsden and Ben Broadbent speeches.
General conclusions
The wave pattern of the GBP/USD pair has long suggested the formation of a new downward wave. The wave b can be very deep, as all recent waves are approximately equal. The first wave of the ascending segment can become even more complicated. The unsuccessful attempt to break through the 1.2615 mark, which corresponds to 127.2% according to Fibonacci, indicates the market’s readiness for sales, and the successful attempt to break through the 1.2445 mark, which is equivalent to 100.0% according to Fibonacci, repeats this signal.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are also some differences. The downward correctional segment of the trend is complete, but at this time, the formation of a downward wave may begin. And this wave can be deep and extended, and the entire trend segment – horizontal, like the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: