Analysis of GBP/USD on April 27th. Failure of the American economy
April 27, 2023 3:22 pm
The wave analysis for the pound/dollar pair still looks complicated because it does not look like a classic trend correction or impulse section. Since the current upward wave has exceeded the peak of the last wave b, the entire downward section of the trend, consisting of waves a-b-c, can be considered complete. Although it is very weakly similar to the trend section for the same period in the euro currency performance, it must be admitted that both pairs have built descending three-wave sets of waves. If this assumption is correct, a new upward trend has begun for the pound. Since I can identify only one wave from March 8th, I believe that forming a new trend section 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, while at the same time, a descending three-wave pattern can be built for the euro. Thus, I expect a deep wave b, as in the case of the formation of the previous three-wave pattern. Therefore, it is possible to expect the pair to decline to the 1.1850 mark or slightly higher.
The British currency continues to fluctuate between 24 and 25 figures.
The pound/dollar exchange rate rose by 60 basis points on Wednesday, but these changes can be disregarded. The pair has fluctuated between the 24 and 25 figures for several days, and today is no exception. Although an important US economic growth report was released an hour ago, even this report could not push the pair out of the 100-point range. The horizontal movement, which has been going on for three weeks, can be seen in the picture above. Thus, the British currency is now in a sideways channel within another. Movement “cannot be more horizontal than this.”
The report on the US GDP for the fourth quarter was disappointing. Growth rates slowed to 1.1% q/q, while markets expected an increase of at least 2.0%. I see nothing strange in that the US economy is starting to slow down, as the Fed rate has already risen to 5% and will rise at least once more, which may happen next week. It would be strange to see economic acceleration with the constant tightening of monetary policy. However, it is also worth noting that the market needed to prepare for such a value. And the market reaction, which resulted in increased demand for the US currency, cannot be overlooked. The market continues to be in a state of panic, far from calm and normal. The increase in demand for the dollar on the failed GDP report, when the US currency had previously had many more reasons to grow, is a very strange market reaction.
General conclusions.
The wave pattern of the pound/dollar pair suggests the formation of a new downward wave. The wave analysis is now ambiguous, as is the news background and the market reaction to the news background. I do not see factors that support the British currency in the long term, and wave b can turn out to be very deep but has not even started yet. A decline in the pair is more likely now, as all the waves in recent times have been roughly the same size. It is possible to trade now from the 1.2440 mark, corresponding to 0.0% Fibonacci. Below it – we sell with targets 300–400 points lower; above it – we cautiously buy or wait.
The picture is similar to the euro/dollar pair on a larger wave scale, but there are still some differences. At this time, the ascending corrective section of the trend is complete. But the three-wave descending section may also be completed. And the new ascending trend section can also be three-wave and horizontal.
The material has been provided by InstaForex Company – www.instaforex.com
The wave analysis for the pound/dollar pair still looks complicated because it does not look like a classic trend correction or impulse section. Since the current upward wave has exceeded the peak of the last wave b, the entire downward section of the trend, consisting of waves a-b-c, can be considered complete. Although it is very weakly similar to the trend section for the same period in the euro currency performance, it must be admitted that both pairs have built descending three-wave sets of waves. If this assumption is correct, a new upward trend has begun for the pound. Since I can identify only one wave from March 8th, I believe that forming a new trend section 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, while at the same time, a descending three-wave pattern can be built for the euro. Thus, I expect a deep wave b, as in the case of the formation of the previous three-wave pattern. Therefore, it is possible to expect the pair to decline to the 1.1850 mark or slightly higher.
The British currency continues to fluctuate between 24 and 25 figures.
The pound/dollar exchange rate rose by 60 basis points on Wednesday, but these changes can be disregarded. The pair has fluctuated between the 24 and 25 figures for several days, and today is no exception. Although an important US economic growth report was released an hour ago, even this report could not push the pair out of the 100-point range. The horizontal movement, which has been going on for three weeks, can be seen in the picture above. Thus, the British currency is now in a sideways channel within another. Movement “cannot be more horizontal than this.”
The report on the US GDP for the fourth quarter was disappointing. Growth rates slowed to 1.1% q/q, while markets expected an increase of at least 2.0%. I see nothing strange in that the US economy is starting to slow down, as the Fed rate has already risen to 5% and will rise at least once more, which may happen next week. It would be strange to see economic acceleration with the constant tightening of monetary policy. However, it is also worth noting that the market needed to prepare for such a value. And the market reaction, which resulted in increased demand for the US currency, cannot be overlooked. The market continues to be in a state of panic, far from calm and normal. The increase in demand for the dollar on the failed GDP report, when the US currency had previously had many more reasons to grow, is a very strange market reaction.
General conclusions.
The wave pattern of the pound/dollar pair suggests the formation of a new downward wave. The wave analysis is now ambiguous, as is the news background and the market reaction to the news background. I do not see factors that support the British currency in the long term, and wave b can turn out to be very deep but has not even started yet. A decline in the pair is more likely now, as all the waves in recent times have been roughly the same size. It is possible to trade now from the 1.2440 mark, corresponding to 0.0% Fibonacci. Below it – we sell with targets 300–400 points lower; above it – we cautiously buy or wait.
The picture is similar to the euro/dollar pair on a larger wave scale, but there are still some differences. At this time, the ascending corrective section of the trend is complete. But the three-wave descending section may also be completed. And the new ascending trend section can also be three-wave and horizontal.
The material has been provided by InstaForex Company – www.instaforex.com
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