GBP/USD. Analysis for August 16th. Inflation fails to impress the market
August 16, 2023 4:25 pm
The wave analysis for the GBP/USD pair remains fairly simple and clear. The construction of the upward wave 3 or c has been completed, and a new downward trend segment has begun, which could theoretically still be wave d. In my view, the British pound has no reason to resume its rise (and many reports and events confirm my opinion), however, the wave pattern has still 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 trend segment could still take on a five-wave form if the market finds new reasons for long-term purchases.
In any case, I expect the continuation of the downward wave, which began exactly as scheduled. If the current wave gets a five-wave internal structure, it can be considered the first impulsive wave, and a further fall of the pound can be expected (after the construction of the correction wave 2 or b). However, there have already been two unsuccessful attempts to break the Fibonacci level of 127.2%, and the latest decline in quotes could be the fifth wave in 1 or a, or the correction as part of a new upward wave of a larger scale.
The British statistics disappoint for the second day in a row.
The GBP/USD exchange rate rose by 25 basis points on Wednesday. By the end of the day, it had increased by 20 points. Recall that unemployment and wage reports were released in the UK on Tuesday. Even British statistics alone should have caused decreased demand for the pound, not its growth. And today, the situation repeated. Inflation in the UK for July declined within market expectations – to 6.8% y/y, and core inflation remained at 6.9%. Both forecasts were met, which means the market had no reason to increase demand for the British pound. However, a pair cannot constantly move in one direction, so yesterday and today, we saw small upward waves that do not yet affect the overall wave picture.
The key level now is 1.2620, which the pair failed to overcome in two attempts. These two unsuccessful attempts tell me that a stronger correction wave may start. Therefore, new signals are needed to verify whether this is not the case or about the end of this correction wave. Today, the US released a report on the number of building permits issued, which is slightly below market expectations. However, the number of construction starts slightly exceeded forecasts, and demand for the US currency increased again for several hours. Based on all the above, I do not expect a strong upward wave now. We should only proceed from the scenario of a decline.
Overall conclusions
The wave pattern of the GBP/USD pair suggests a decline. As I recommended, my readers could have opened sell positions several weeks ago, and now they can close them. The 1.2620 level has been successfully reached. There is a risk of completing the current downward wave if it is wave d. In this case, the construction of wave 5 could have begun from the current levels. But we are currently observing the construction of a corrective wave within a new downward trend segment. If this happens, the pair will not grow much above the 1.2840 mark, and a new downward wave will begin.
The picture is similar to the EUR/USD pair on a larger wave scale, but there are still some differences. The downward correction trend segment is completed, and the construction of a new, upward 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
The wave analysis for the GBP/USD pair remains fairly simple and clear. The construction of the upward wave 3 or c has been completed, and a new downward trend segment has begun, which could theoretically still be wave d. In my view, the British pound has no reason to resume its rise (and many reports and events confirm my opinion), however, the wave pattern has still 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 trend segment could still take on a five-wave form if the market finds new reasons for long-term purchases.
In any case, I expect the continuation of the downward wave, which began exactly as scheduled. If the current wave gets a five-wave internal structure, it can be considered the first impulsive wave, and a further fall of the pound can be expected (after the construction of the correction wave 2 or b). However, there have already been two unsuccessful attempts to break the Fibonacci level of 127.2%, and the latest decline in quotes could be the fifth wave in 1 or a, or the correction as part of a new upward wave of a larger scale.
The British statistics disappoint for the second day in a row.
The GBP/USD exchange rate rose by 25 basis points on Wednesday. By the end of the day, it had increased by 20 points. Recall that unemployment and wage reports were released in the UK on Tuesday. Even British statistics alone should have caused decreased demand for the pound, not its growth. And today, the situation repeated. Inflation in the UK for July declined within market expectations – to 6.8% y/y, and core inflation remained at 6.9%. Both forecasts were met, which means the market had no reason to increase demand for the British pound. However, a pair cannot constantly move in one direction, so yesterday and today, we saw small upward waves that do not yet affect the overall wave picture.
The key level now is 1.2620, which the pair failed to overcome in two attempts. These two unsuccessful attempts tell me that a stronger correction wave may start. Therefore, new signals are needed to verify whether this is not the case or about the end of this correction wave. Today, the US released a report on the number of building permits issued, which is slightly below market expectations. However, the number of construction starts slightly exceeded forecasts, and demand for the US currency increased again for several hours. Based on all the above, I do not expect a strong upward wave now. We should only proceed from the scenario of a decline.
Overall conclusions
The wave pattern of the GBP/USD pair suggests a decline. As I recommended, my readers could have opened sell positions several weeks ago, and now they can close them. The 1.2620 level has been successfully reached. There is a risk of completing the current downward wave if it is wave d. In this case, the construction of wave 5 could have begun from the current levels. But we are currently observing the construction of a corrective wave within a new downward trend segment. If this happens, the pair will not grow much above the 1.2840 mark, and a new downward wave will begin.
The picture is similar to the EUR/USD pair on a larger wave scale, but there are still some differences. The downward correction trend segment is completed, and the construction of a new, upward 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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