Regarding the GBP/USD pair, the wave labeling still appears complex and ambiguous. In the sense that it does not resemble a classical corrective or impulsive segment of the trend. Since the peak of the current upward wave exceeded the peak of the last wave B, the entire downward segment of the trend consisting of waves A-B-C can be considered complete. Therefore, forming a new upward trend segment is ongoing for the pound. From March 8th to May 10th, I can identify only one wave of the current scale, so there are valid reasons to assume that forming a new trend segment will take considerable time.
Both pairs should form similar wave formations. If this is indeed the case, wave 2 or B for the pound may be extensive, while at the same time, a descending three-wave structure could be formed for the euro. Therefore, I expect a deep wave B, as with the previous three-wave structure. Consequently, we expect a decline in the pair towards the 1.1850 level or slightly higher. At the moment, wave 1 or A has all the necessary grounds to be considered complete.
Inflation in Britain is falling or rising?
The GBP/USD exchange rate decreased by 40 basis points on Wednesday. The amplitude of movements still needs to be lowered, but today it showed a good value. The reason behind this is the news background, which has significantly influenced the market for the second consecutive day. Yesterday, business activity indices were released in the UK, and they all turned out to be weaker than market expectations. Andrew Bailey spoke in the UK Parliament yesterday, but his statements can be considered “strong.” At least the Governor of the Bank of England admitted that the interest rate may rise more than previously anticipated as inflation remains too high. Another speech by Bailey will take place today, and the most important report of this week, inflation, was released this morning.
At first glance, the consumer price index finally showed the movement that everyone, the market and the Bank of England, was waiting for. In April, inflation decreased from 10.1% y/y to 8.7% y/y. It seemed like everything was good; inflation started to decline. However, it’s more complicated because the core consumer price index, which is equally important for regulators, increased from 6.2% y/y to 6.8% y/y in the same month. So how should we react to this report? What conclusion can be drawn? Has inflation decreased or increased again? What should the Bank of England do next? Pause and wait for inflation to decrease even further (if it does?), or continue tightening? There are no answers to all these questions. Meanwhile, the demand for the pound continues to decline during this time. It is completely justified, as wave labeling also needs to be confirmed.
General conclusions.
The wave pattern of the GBP/USD pair has long implied the formation of a new downward wave. Wave B can be very deep, as all recent waves are approximately equal. An unsuccessful attempt to break the 1.2615 level, corresponding to 127.2% Fibonacci, indicates the market’s readiness for sales. A successful attempt to break the 1.2445 level, which is equivalent to 100.0% Fibonacci, reinforces this signal. I recommend selling the pound with targets around the 23 and 22 figures. However, most likely, the decline will be more significant.
The pattern resembles the euro/dollar pair on a larger wave scale, but some differences remain. The downward corrective segment of the trend is complete, but at this time, the formation of a downward wave may begin. This wave could be deep and extensive while the entire trend segment remains horizontal, similar to the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
Regarding the GBP/USD pair, the wave labeling still appears complex and ambiguous. In the sense that it does not resemble a classical corrective or impulsive segment of the trend. Since the peak of the current upward wave exceeded the peak of the last wave B, the entire downward segment of the trend consisting of waves A-B-C can be considered complete. Therefore, forming a new upward trend segment is ongoing for the pound. From March 8th to May 10th, I can identify only one wave of the current scale, so there are valid reasons to assume that forming a new trend segment will take considerable time.
Both pairs should form similar wave formations. If this is indeed the case, wave 2 or B for the pound may be extensive, while at the same time, a descending three-wave structure could be formed for the euro. Therefore, I expect a deep wave B, as with the previous three-wave structure. Consequently, we expect a decline in the pair towards the 1.1850 level or slightly higher. At the moment, wave 1 or A has all the necessary grounds to be considered complete.
Inflation in Britain is falling or rising?
The GBP/USD exchange rate decreased by 40 basis points on Wednesday. The amplitude of movements still needs to be lowered, but today it showed a good value. The reason behind this is the news background, which has significantly influenced the market for the second consecutive day. Yesterday, business activity indices were released in the UK, and they all turned out to be weaker than market expectations. Andrew Bailey spoke in the UK Parliament yesterday, but his statements can be considered “strong.” At least the Governor of the Bank of England admitted that the interest rate may rise more than previously anticipated as inflation remains too high. Another speech by Bailey will take place today, and the most important report of this week, inflation, was released this morning.
At first glance, the consumer price index finally showed the movement that everyone, the market and the Bank of England, was waiting for. In April, inflation decreased from 10.1% y/y to 8.7% y/y. It seemed like everything was good; inflation started to decline. However, it’s more complicated because the core consumer price index, which is equally important for regulators, increased from 6.2% y/y to 6.8% y/y in the same month. So how should we react to this report? What conclusion can be drawn? Has inflation decreased or increased again? What should the Bank of England do next? Pause and wait for inflation to decrease even further (if it does?), or continue tightening? There are no answers to all these questions. Meanwhile, the demand for the pound continues to decline during this time. It is completely justified, as wave labeling also needs to be confirmed.
General conclusions.
The wave pattern of the GBP/USD pair has long implied the formation of a new downward wave. Wave B can be very deep, as all recent waves are approximately equal. An unsuccessful attempt to break the 1.2615 level, corresponding to 127.2% Fibonacci, indicates the market’s readiness for sales. A successful attempt to break the 1.2445 level, which is equivalent to 100.0% Fibonacci, reinforces this signal. I recommend selling the pound with targets around the 23 and 22 figures. However, most likely, the decline will be more significant.
The pattern resembles the euro/dollar pair on a larger wave scale, but some differences remain. The downward corrective segment of the trend is complete, but at this time, the formation of a downward wave may begin. This wave could be deep and extensive while the entire trend segment remains horizontal, similar to the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
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