For the pound/dollar pair, the wave pattern remains fairly simple and understandable. Constructing an upward wave 3 or c has been completed, and a presumably new downward trend section has begun, which theoretically can still be wave d. Still, the probability of this is already tending to zero. The British pound has no reason to resume the increase; however, the wave pattern has transformed into a more complex one, and wave 3 or c has taken on a more extended form than many analysts expected a few months ago. The entire upward section of the trend may still take a five-wave form if the market finds new reasons for long-term purchases.
In any case, I expect the continuation of the construction of the downward wave, which began on schedule. If the current wave gets a five-wave internal structure, it can be considered the first impulse wave and expect a further pound fall (after the construction of the corrective wave 2 or b). Three attempts failed to break through the 127.2% Fibonacci level, but the fourth was successful. Therefore, there are no signs of completion of the first wave.
Demand for the pound is slowly declining.
The exchange rate of the pound/dollar pair fell by 30 basis points on Tuesday, which is very little. The amplitude of movements today was also low, but the news background was completely absent. Today, only the JOLTS report on open vacancies in the United States for July will be released, which is unlikely to change the market mood. And the market’s mood is now as transparent as possible – downward. For several reasons, the decline in demand for the pound has been going on for more than a month.
The main one is constructing a corrective section of the trend. Although the previous section (upward) turned out to be three-wave, a similar downward section can still be built. This is what we are observing at this time. The second reason is that the Briton was in demand for almost a year, and as we know, nothing lasts forever. The market has had enough of the pound, and now it’s time for the US dollar. The third reason is Jerome Powell’s aggressive statements on Friday. While the market needs a better understanding of what to expect from the Bank of England, there are no questions about the FOMC plans. The Fed Chairman has indicated that the rate can continue to rise if the situation demands it.
And the situation may require additional tightening. Inflation has increased by the end of July and may increase in August. This will be quite a good reason to raise the rate unscheduled in September. And then again in November or December. Consequently, the Fed rate may rise twice, which few people expected. In turn, this pushes the market to new purchases of the US currency.
General conclusions.
The wave pattern of the pound/dollar pair suggests a decline within the downward trend segment. There is a danger of completing the current descending wave if it is d and not 1. In this case, the construction of wave 5 can begin from the current marks. But we are now seeing the construction of the first wave as part of a new downward trend segment. A successful attempt to break through the 1.2618 mark, corresponding to 127.2% Fibonacci, indicates that the market is ready for new sales. I advise you to sell with targets located around the 1.2443 mark.
The picture is similar to the euro/dollar pair at the higher wave scale, but some differences remain. The downward correction section of the trend is completed, and the construction of a new, ascending one continues, which may already be completed or may take a full-fledged five-wave form.
The material has been provided by InstaForex Company – www.instaforex.com
For the pound/dollar pair, the wave pattern remains fairly simple and understandable. Constructing an upward wave 3 or c has been completed, and a presumably new downward trend section has begun, which theoretically can still be wave d. Still, the probability of this is already tending to zero. The British pound has no reason to resume the increase; however, the wave pattern has transformed into a more complex one, and wave 3 or c has taken on a more extended form than many analysts expected a few months ago. The entire upward section of the trend may still take a five-wave form if the market finds new reasons for long-term purchases.
In any case, I expect the continuation of the construction of the downward wave, which began on schedule. If the current wave gets a five-wave internal structure, it can be considered the first impulse wave and expect a further pound fall (after the construction of the corrective wave 2 or b). Three attempts failed to break through the 127.2% Fibonacci level, but the fourth was successful. Therefore, there are no signs of completion of the first wave.
Demand for the pound is slowly declining.
The exchange rate of the pound/dollar pair fell by 30 basis points on Tuesday, which is very little. The amplitude of movements today was also low, but the news background was completely absent. Today, only the JOLTS report on open vacancies in the United States for July will be released, which is unlikely to change the market mood. And the market’s mood is now as transparent as possible – downward. For several reasons, the decline in demand for the pound has been going on for more than a month.
The main one is constructing a corrective section of the trend. Although the previous section (upward) turned out to be three-wave, a similar downward section can still be built. This is what we are observing at this time. The second reason is that the Briton was in demand for almost a year, and as we know, nothing lasts forever. The market has had enough of the pound, and now it’s time for the US dollar. The third reason is Jerome Powell’s aggressive statements on Friday. While the market needs a better understanding of what to expect from the Bank of England, there are no questions about the FOMC plans. The Fed Chairman has indicated that the rate can continue to rise if the situation demands it.
And the situation may require additional tightening. Inflation has increased by the end of July and may increase in August. This will be quite a good reason to raise the rate unscheduled in September. And then again in November or December. Consequently, the Fed rate may rise twice, which few people expected. In turn, this pushes the market to new purchases of the US currency.
General conclusions.
The wave pattern of the pound/dollar pair suggests a decline within the downward trend segment. There is a danger of completing the current descending wave if it is d and not 1. In this case, the construction of wave 5 can begin from the current marks. But we are now seeing the construction of the first wave as part of a new downward trend segment. A successful attempt to break through the 1.2618 mark, corresponding to 127.2% Fibonacci, indicates that the market is ready for new sales. I advise you to sell with targets located around the 1.2443 mark.
The picture is similar to the euro/dollar pair at the higher wave scale, but some differences remain. The downward correction section of the trend is completed, and the construction of a new, ascending one continues, which may already be completed or may take a full-fledged five-wave form.
The material has been provided by InstaForex Company – www.instaforex.com
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