Analysis of GBP/USD. July 12th. Bailey: Wages are rising too fast, and the labor market is cooling
July 12, 2023 6:23 pm
The wave pattern of the GBP/USD pair has changed its appearance to a simpler and more understandable one. Instead of a complex corrective section of the trend, we can see an impulsive ascending or a simpler corrective one. At this time, the formation of the upward wave 3 or c continues, and the British pound has an excellent opportunity to grow up to the 31-figure mark. The British currency has no reason to continue rising (and many reports and events support my opinion), and the supposed wave 3 or c may be nearing completion. However, the wave markup has become more complex, and wave 3 or c has taken on a more extended form. Therefore, it can become even more complicated.
The euro currency wave pattern transformed into one similar to the GBP. The GBP markup now looks much simpler and clearer. Within wave 3 or c, a five-wave impulse structure is traced. If this is indeed the case, the formation of this wave will be completed shortly. Then we will see either a three-wave corrective structure or the beginning of forming a new downward trend section.
The British statistics were unequivocal
On Wednesday, the GBP/USD exchange rate increased much weaker than EUR/USD, only by 60 basis points. Recently, the British pound has been growing rapidly and only sometimes has a strong news background. I wrote earlier that the reporting in the UK on Tuesday was disappointing, which was also mentioned today by the Governor of the Bank of England, Andrew Bailey.
Bailey noted that the current wage growth rates do not correspond to the target level of inflation, and the labor market shows signs of “cooling.” This indicates that the tight monetary policy of the Bank of England is beginning to put pressure not only on inflation but also on the economy. Based on this, one can conclude that the Bank of England may be more cautious with “hawkish” decisions at the upcoming meetings. At the last meeting, it raised the rate by 50 basis points, and at the next – a maximum of 25. The British pound’s upward movement is nearing its end, just like the process of tightening policy by the Bank of England is ending.
The British pound’s exchange rate will stay below the 1.3084 mark soon. However, a successful attempt to break through this mark will indicate that the market retains a positive attitude towards the British economy, the central bank’s policy, and the British pound. If this happens, buying the pair will again be advisable. A failed attempt to break the 200.0% Fibonacci level will indicate the market’s readiness to complete the formation of the upward trend section or at least build a global corrective wave.
General conclusions.
The wave pattern of the pound/dollar pair implies the formation of an upward wave set. Earlier, I advised buying the pair in case of an unsuccessful attempt to break the 1.2615 mark, which equates to 127.2% on Fibonacci, and now a successful attempt to break the 1.2842 mark indicates a complication of the ascending wave 3 or c, so I continue to advise buying with targets around 1.3084, which corresponds to 200.0% on Fibonacci.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are also some differences. The descending corrective section of the trend is complete, and the formation of a new ascending one continues, which may already be completed, or it may take a full-fledged five-wave form. And even if it takes a three-wave form, the third wave can be extended or shortened.
The material has been provided by InstaForex Company – www.instaforex.com
The wave pattern of the GBP/USD pair has changed its appearance to a simpler and more understandable one. Instead of a complex corrective section of the trend, we can see an impulsive ascending or a simpler corrective one. At this time, the formation of the upward wave 3 or c continues, and the British pound has an excellent opportunity to grow up to the 31-figure mark. The British currency has no reason to continue rising (and many reports and events support my opinion), and the supposed wave 3 or c may be nearing completion. However, the wave markup has become more complex, and wave 3 or c has taken on a more extended form. Therefore, it can become even more complicated.
The euro currency wave pattern transformed into one similar to the GBP. The GBP markup now looks much simpler and clearer. Within wave 3 or c, a five-wave impulse structure is traced. If this is indeed the case, the formation of this wave will be completed shortly. Then we will see either a three-wave corrective structure or the beginning of forming a new downward trend section.
The British statistics were unequivocal
On Wednesday, the GBP/USD exchange rate increased much weaker than EUR/USD, only by 60 basis points. Recently, the British pound has been growing rapidly and only sometimes has a strong news background. I wrote earlier that the reporting in the UK on Tuesday was disappointing, which was also mentioned today by the Governor of the Bank of England, Andrew Bailey.
Bailey noted that the current wage growth rates do not correspond to the target level of inflation, and the labor market shows signs of “cooling.” This indicates that the tight monetary policy of the Bank of England is beginning to put pressure not only on inflation but also on the economy. Based on this, one can conclude that the Bank of England may be more cautious with “hawkish” decisions at the upcoming meetings. At the last meeting, it raised the rate by 50 basis points, and at the next – a maximum of 25. The British pound’s upward movement is nearing its end, just like the process of tightening policy by the Bank of England is ending.
The British pound’s exchange rate will stay below the 1.3084 mark soon. However, a successful attempt to break through this mark will indicate that the market retains a positive attitude towards the British economy, the central bank’s policy, and the British pound. If this happens, buying the pair will again be advisable. A failed attempt to break the 200.0% Fibonacci level will indicate the market’s readiness to complete the formation of the upward trend section or at least build a global corrective wave.
General conclusions.
The wave pattern of the pound/dollar pair implies the formation of an upward wave set. Earlier, I advised buying the pair in case of an unsuccessful attempt to break the 1.2615 mark, which equates to 127.2% on Fibonacci, and now a successful attempt to break the 1.2842 mark indicates a complication of the ascending wave 3 or c, so I continue to advise buying with targets around 1.3084, which corresponds to 200.0% on Fibonacci.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are also some differences. The descending corrective section of the trend is complete, and the formation of a new ascending one continues, which may already be completed, or it may take a full-fledged five-wave form. And even if it takes a three-wave form, the third wave can be extended or shortened.
The material has been provided by InstaForex Company – www.instaforex.com
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