Analysis of GBP/USD. September 6. The ISM index pleased traders
September 6, 2023 5:23 pm
Regarding the pound/dollar pair, the wave analysis remains relatively simple and clear. The construction of ascending wave 3 or C has ended, and a new presumed downward trend has begun, which theoretically could be wave D. Still, the probability of this is close to zero. I see no reason for the British pound to resume its ascent, but the wave analysis has transformed into a more complex one, and wave 3 or C has taken on a longer form than many analysts expected a few months ago. The upward trend may still take on a five-wave structure if the market finds new reasons for long-term purchases. I currently see no such reasons.
The internal wave structure of the first wave of the new trend looks complex—much more complex than that of the euro/dollar. However, the market sentiment is relatively clear. Despite the pound’s resistance, a few reasons exist for it to rise. The latest important data from America was disappointing, but the situation in Britain has not been favorable for the markets for a long time. The pair will continue to decline, following the euro.
Business activity in the US services sector is growing.
The exchange rate of the pound/dollar pair decreased by another 70 basis points on Wednesday. In the first half of the day, there was no news background for the pair, but in the second half, data on business activity in the US was released, leading to increased demand for the US Dollar. The S&P business activity index fell to 50.5 points, below expectations. This indicator could have caused a decline in the US currency if it were not for the ISM business activity index, which has always been considered more important. ISM rose from 52.7 to 54.5, significantly surpassing market expectations. This index caused a sharp increase in demand for the US Dollar, leading to a decline in the pair. However, according to the current wave analysis, the pound’s decline is expected to continue. The nearest target is 1.2444.
In the remaining two days of the week, the news background will include a report in the US on initial and continuing jobless claims. This report is likely to continue the growing demand for the US dollar. The current movement of the pair involves frequent corrective waves but is generally bearish. Since we have seen a decline in the past few days, the pair will attempt to rebound from the lows achieved on Thursday and Friday. Ideally, this rebound will start after an unsuccessful attempt to break the 100.0% Fibonacci level. I do not expect the pound’s decline to end anytime soon, but central bank meetings will begin next week, and who knows how they will end?
General conclusions.
The wave pattern of the pound/dollar pair suggests a decline within the descending trend. Completing the current descending wave is risky if it is wave D, not 1. In this case, wave 5 could start at the current levels. However, we are currently observing the construction of the first wave of the new segment. The maximum buyers can expect is wave 2 or B construction. I still recommend selling with targets around 1.2444, corresponding to the 100.0% Fibonacci retracement.
The picture resembles the euro/dollar pair on a larger wave scale, but there are still some differences. The descending correctional segment of the trend has ended, and the construction of a new ascending one continues, which may already be completed or take on a full-fledged five-wave form.
The material has been provided by InstaForex Company – www.instaforex.com
Regarding the pound/dollar pair, the wave analysis remains relatively simple and clear. The construction of ascending wave 3 or C has ended, and a new presumed downward trend has begun, which theoretically could be wave D. Still, the probability of this is close to zero. I see no reason for the British pound to resume its ascent, but the wave analysis has transformed into a more complex one, and wave 3 or C has taken on a longer form than many analysts expected a few months ago. The upward trend may still take on a five-wave structure if the market finds new reasons for long-term purchases. I currently see no such reasons.
The internal wave structure of the first wave of the new trend looks complex—much more complex than that of the euro/dollar. However, the market sentiment is relatively clear. Despite the pound’s resistance, a few reasons exist for it to rise. The latest important data from America was disappointing, but the situation in Britain has not been favorable for the markets for a long time. The pair will continue to decline, following the euro.
Business activity in the US services sector is growing.
The exchange rate of the pound/dollar pair decreased by another 70 basis points on Wednesday. In the first half of the day, there was no news background for the pair, but in the second half, data on business activity in the US was released, leading to increased demand for the US Dollar. The S&P business activity index fell to 50.5 points, below expectations. This indicator could have caused a decline in the US currency if it were not for the ISM business activity index, which has always been considered more important. ISM rose from 52.7 to 54.5, significantly surpassing market expectations. This index caused a sharp increase in demand for the US Dollar, leading to a decline in the pair. However, according to the current wave analysis, the pound’s decline is expected to continue. The nearest target is 1.2444.
In the remaining two days of the week, the news background will include a report in the US on initial and continuing jobless claims. This report is likely to continue the growing demand for the US dollar. The current movement of the pair involves frequent corrective waves but is generally bearish. Since we have seen a decline in the past few days, the pair will attempt to rebound from the lows achieved on Thursday and Friday. Ideally, this rebound will start after an unsuccessful attempt to break the 100.0% Fibonacci level. I do not expect the pound’s decline to end anytime soon, but central bank meetings will begin next week, and who knows how they will end?
General conclusions.
The wave pattern of the pound/dollar pair suggests a decline within the descending trend. Completing the current descending wave is risky if it is wave D, not 1. In this case, wave 5 could start at the current levels. However, we are currently observing the construction of the first wave of the new segment. The maximum buyers can expect is wave 2 or B construction. I still recommend selling with targets around 1.2444, corresponding to the 100.0% Fibonacci retracement.
The picture resembles the euro/dollar pair on a larger wave scale, but there are still some differences. The descending correctional segment of the trend has ended, and the construction of a new ascending one continues, which may already be completed or take on a full-fledged five-wave form.
The material has been provided by InstaForex Company – www.instaforex.com
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