GBP/USD. Analysis for May 15. Neel Kashkari, Fed: the regulator should not loosen its grip
May 15, 2023 6:23 pm
The wave markup for the GBP/USD pair still appears complex and ambiguous because it does not look like a classic corrective or impulse trend segment. Since the peak of the current upward wave has exceeded the peak of the last wave b, the entire downward trend segment, consisting of waves a-b-c, can be considered complete. Consequently, a new upward trend segment is now being built for the pound. Starting March 8, I can single out only one wave of the current scale, so there are many reasons to assume that forming a new trend segment will take a lot of time.
Both pairs should build similar wave formations. If this is indeed the case, then wave 2 or b for the pound can be extended, and at the same time, a downward three-wave can be built for the euro. Thus, I expect a deep wave b, as with the formation of the previous three waves. Therefore, a decline in the pair can be expected to the 1.1850 mark or slightly higher. At the moment, wave 1 or a has every chance to be considered complete, but there are still certain doubts.
Corrective Monday.
The GBP/USD pair rose by 80 basis points on Monday, which is quite substantial. Several FOMC members spoke during the day, but there were no bright and loud comments as usual. I note that a FOMC meeting was recently held, at which the rate was raised again by 25 basis points. It would be strange if FOMC members were already talking about the need for a new tightening of monetary policy or, conversely, about the absence of such a need without new inflation, labor market, and GDP reports. Therefore, all comments were, as they say, neutral.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said that inflation remains too high and that the regulator has a long way to go before it returns to the target mark. Kashkari noted the excellent state of the labor market, which copes very well with the worsening economic conditions, but still, “it is not as good as it was nine months ago; some slowdown is present.” Although these comments could cause a decrease in demand for the US currency, today’s increase is just a corrective wave. The retreat of quotes from the peaks reached last week is currently about 240 basis points, which does not allow me to conclude about the complete completion of the first wave of the upward trend segment. The Bank of England is close to completing the rate hike process, which should lead to the completion of the formation of the first wave.
General conclusions.
The wave picture of the GBP/USD pair has long suggested the formation of a new downward wave. The wave markup is somewhat unambiguous now, just like the news background. I don’t see factors that would support the British pound in the long term, and wave b could turn out to be very deep, but there is yet to be complete confidence that it has begun. A decrease in the pair is now more likely, but the first wave of the upward segment can become even more complex. The unsuccessful attempt to break through the 1.2615 mark, which corresponds to 127.2% according to Fibonacci, indicates the market’s readiness for sales. Still, according to Fibonacci, there was also an unsuccessful attempt to break through 100.0%.
On a larger wave scale, the picture is similar to the Euro/Dollar pair, but there are also some differences. The downward corrective segment of the trend is completed, but at this time, the formation of a downward wave may begin. And this wave can turn out to be deep and extended, and the entire trend segment – horizontal, like the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
The wave markup for the GBP/USD pair still appears complex and ambiguous because it does not look like a classic corrective or impulse trend segment. Since the peak of the current upward wave has exceeded the peak of the last wave b, the entire downward trend segment, consisting of waves a-b-c, can be considered complete. Consequently, a new upward trend segment is now being built for the pound. Starting March 8, I can single out only one wave of the current scale, so there are many reasons to assume that forming a new trend segment will take a lot of time.
Both pairs should build similar wave formations. If this is indeed the case, then wave 2 or b for the pound can be extended, and at the same time, a downward three-wave can be built for the euro. Thus, I expect a deep wave b, as with the formation of the previous three waves. Therefore, a decline in the pair can be expected to the 1.1850 mark or slightly higher. At the moment, wave 1 or a has every chance to be considered complete, but there are still certain doubts.
Corrective Monday.
The GBP/USD pair rose by 80 basis points on Monday, which is quite substantial. Several FOMC members spoke during the day, but there were no bright and loud comments as usual. I note that a FOMC meeting was recently held, at which the rate was raised again by 25 basis points. It would be strange if FOMC members were already talking about the need for a new tightening of monetary policy or, conversely, about the absence of such a need without new inflation, labor market, and GDP reports. Therefore, all comments were, as they say, neutral.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said that inflation remains too high and that the regulator has a long way to go before it returns to the target mark. Kashkari noted the excellent state of the labor market, which copes very well with the worsening economic conditions, but still, “it is not as good as it was nine months ago; some slowdown is present.” Although these comments could cause a decrease in demand for the US currency, today’s increase is just a corrective wave. The retreat of quotes from the peaks reached last week is currently about 240 basis points, which does not allow me to conclude about the complete completion of the first wave of the upward trend segment. The Bank of England is close to completing the rate hike process, which should lead to the completion of the formation of the first wave.
General conclusions.
The wave picture of the GBP/USD pair has long suggested the formation of a new downward wave. The wave markup is somewhat unambiguous now, just like the news background. I don’t see factors that would support the British pound in the long term, and wave b could turn out to be very deep, but there is yet to be complete confidence that it has begun. A decrease in the pair is now more likely, but the first wave of the upward segment can become even more complex. The unsuccessful attempt to break through the 1.2615 mark, which corresponds to 127.2% according to Fibonacci, indicates the market’s readiness for sales. Still, according to Fibonacci, there was also an unsuccessful attempt to break through 100.0%.
On a larger wave scale, the picture is similar to the Euro/Dollar pair, but there are also some differences. The downward corrective segment of the trend is completed, but at this time, the formation of a downward wave may begin. And this wave can turn out to be deep and extended, and the entire trend segment – horizontal, like the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
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