GBP/USD. Analysis for May 23. The British pound continues to lose initiative
May 23, 2023 4:22 pm
The wave analysis of the GBP/USD pair still appears complex and ambiguous because it does not resemble a classical corrective or impulsive segment of the trend. Since the peak of the current ascending wave surpassed the peak of the last wave b, the entire descending segment of the trend, consisting of waves a-b-c, can be considered complete. Therefore, forming a new ascending trend segment in the pound continues. Starting from March 8, I can identify only one wave of the current scale, indicating that forming the new trend segment may take a long time.
Both pairs should form similar wave formations. If this is true, wave 2 or b in the pound may be extensive, while simultaneously, a descending three-wave structure could be formed in the euro. Therefore, I expect a deep wave b, similar to the formation of the previous three-wave structure. Consequently, it is possible to expect a decline in the pair toward the level of 1.1850 or slightly higher. Currently, wave 1 or a has all the necessary grounds to be considered complete.
Business activity in the United Kingdom is declining.
The GBP/USD exchange rate declined by 35 basis points on Tuesday. The amplitude of movements remains relatively low, but the British pound is losing value almost every day, similar to the European currency. The demand for the euro and the pound is declining synchronously, which aligns with the current wave pattern. Today, the market had sufficient reasons to sell the pound. The service sector activity index decreased by 0.8 points, the manufacturing sector decreased by 0.9 points, and the composite index decreased by 1.0. Manufacturing activity has been below the 50.0 mark for ten months, indicating a negative trend in the industry. The service sector maintains high inflation in the UK and remains stable.
In addition to the UK statistics, Andrew Bailey spoke before the Treasury Committee in Parliament today. Specifically, Bailey stated that inflation should start decreasing from April, but risks associated with maintaining its state remain. Bailey mentioned that supply chain disruptions during the pandemic were a “passing shock.” Still, Ukraine’s military conflict exacerbated global economic problems, leading to unprecedented price growth in many countries.
Bailey did not mention that central banks worldwide actively stimulated the economy through money printing, but these measures can be considered necessary. Otherwise, the economy of any country would take years to recover from the crisis caused by the pandemic. However, Bailey’s statements do not bode well for the British pound. If inflation decreases rapidly, the Bank of England will likely conclude the tightening of monetary policy, and the pound will lose an important support factor. However, this scenario is needed to maintain the working wave pattern.
General conclusions.
The wave pattern of the GBP/USD pair has long suggested the formation of a new descending wave. Wave b could be very deep, as all recent waves are approximately equal. The unsuccessful attempt to break the level of 1.2615, which corresponds to 127.2% Fibonacci, indicates the market’s readiness for selling. In contrast, the successful attempt to break the level of 1.2445, which is equivalent to 100.0% Fibonacci, confirms this signal. I recommend selling the pound with targets around the 23 and 22-figure levels.
The picture is similar to the EUR/USD pair on a larger wave scale, but there are still some differences. The descending corrective segment of the trend is complete, but a new descending wave could begin at this time. This wave could be deep and extensive, while the entire trend segment could be horizontal, similar to the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
The wave analysis of the GBP/USD pair still appears complex and ambiguous because it does not resemble a classical corrective or impulsive segment of the trend. Since the peak of the current ascending wave surpassed the peak of the last wave b, the entire descending segment of the trend, consisting of waves a-b-c, can be considered complete. Therefore, forming a new ascending trend segment in the pound continues. Starting from March 8, I can identify only one wave of the current scale, indicating that forming the new trend segment may take a long time.
Both pairs should form similar wave formations. If this is true, wave 2 or b in the pound may be extensive, while simultaneously, a descending three-wave structure could be formed in the euro. Therefore, I expect a deep wave b, similar to the formation of the previous three-wave structure. Consequently, it is possible to expect a decline in the pair toward the level of 1.1850 or slightly higher. Currently, wave 1 or a has all the necessary grounds to be considered complete.
Business activity in the United Kingdom is declining.
The GBP/USD exchange rate declined by 35 basis points on Tuesday. The amplitude of movements remains relatively low, but the British pound is losing value almost every day, similar to the European currency. The demand for the euro and the pound is declining synchronously, which aligns with the current wave pattern. Today, the market had sufficient reasons to sell the pound. The service sector activity index decreased by 0.8 points, the manufacturing sector decreased by 0.9 points, and the composite index decreased by 1.0. Manufacturing activity has been below the 50.0 mark for ten months, indicating a negative trend in the industry. The service sector maintains high inflation in the UK and remains stable.
In addition to the UK statistics, Andrew Bailey spoke before the Treasury Committee in Parliament today. Specifically, Bailey stated that inflation should start decreasing from April, but risks associated with maintaining its state remain. Bailey mentioned that supply chain disruptions during the pandemic were a “passing shock.” Still, Ukraine’s military conflict exacerbated global economic problems, leading to unprecedented price growth in many countries.
Bailey did not mention that central banks worldwide actively stimulated the economy through money printing, but these measures can be considered necessary. Otherwise, the economy of any country would take years to recover from the crisis caused by the pandemic. However, Bailey’s statements do not bode well for the British pound. If inflation decreases rapidly, the Bank of England will likely conclude the tightening of monetary policy, and the pound will lose an important support factor. However, this scenario is needed to maintain the working wave pattern.
General conclusions.
The wave pattern of the GBP/USD pair has long suggested the formation of a new descending wave. Wave b could be very deep, as all recent waves are approximately equal. The unsuccessful attempt to break the level of 1.2615, which corresponds to 127.2% Fibonacci, indicates the market’s readiness for selling. In contrast, the successful attempt to break the level of 1.2445, which is equivalent to 100.0% Fibonacci, confirms this signal. I recommend selling the pound with targets around the 23 and 22-figure levels.
The picture is similar to the EUR/USD pair on a larger wave scale, but there are still some differences. The descending corrective segment of the trend is complete, but a new descending wave could begin at this time. This wave could be deep and extensive, while the entire trend segment could be horizontal, similar to the previous one.
The material has been provided by InstaForex Company – www.instaforex.com
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