GBP/USD. Analysis for October 4th. ISM index saved the dollar from failure twice this week
October 4, 2023 6:25 pm
The wave analysis for the pound/dollar pair remains quite simple and understandable. The construction of a new downward trend segment, its first wave, continues, and it is significantly prolonged in time. In my opinion, the British pound has no reason to resume its uptrend, so I don’t even consider the scenario of a new upward segment. The first wave of the descending trend segment has already taken on a very prolonged form, but demand for the pound continues to remain low. I remind you that there are no specific target sizes for waves. The first wave can be constructed for as long as necessary without any restrictions.
The internal wave structure of the first wave of the new trend segment looks complex, and it is difficult to discern five waves within it. But five waves are visible in the euro currency. If the construction of the bearish set of waves is completed for the euro, then, with an 80% probability, it will be completed for the pound as well. However, the pair has made a second successful attempt to break through the 1.2120 level, which corresponds to 76.4% according to Fibonacci, and this does not provide grounds to expect the completion of the first wave. At the moment, it is possible to rely on the euro, which has signs of completing the first wave.
The British pound still lacks support from the news background.
The pound/dollar currency pair rose by 60 basis points on Wednesday. The increase in the quotes of the British currency began in the morning, which is quite strange since only the Business Activity Index in the UK services sector was released in the morning. It exceeded market expectations but still remained lower in September than in August, at 49.3 versus 49.5. The increase in the pound started one and a half hours before the release of this report, so I conclude that it is not related at all. The market begins to wonder if the first wave is too prolonged, and it’s time to start building corrective wave 2 or b. The news background does not help buyers; on the contrary, it constantly confuses them.
On Monday, the US ISM Manufacturing Index turned out to be much better than market expectations, at 49 points, boosting demand for the dollar. On Wednesday, the ISM Non-Manufacturing Index was in line with forecasts (53.6) and did not cause the US currency to fall in price. Yesterday, the JOLTS report exceeded expectations and also kept the US currency from falling. In other words, every day the market received some reason that prevented it from starting a full-fledged sell-off of the US currency. I also want to note that today’s ADP report turned out to be much worse than expected, leading to a 50-point drop in the US currency, but the overall news background still supports the dollar more often than it causes it to fall. Based on everything said in these two articles, the chance of starting a corrective wave lies only in an unsuccessful attempt to break through the 1.0463 level for the euro.
General Conclusions
The wave pattern of the pound/dollar pair suggests a decline within a new downward trend segment. The maximum that the British pound can expect in the near future is the construction of wave 2 or b. But as we can see, even with a corrective wave, significant problems arise. At the moment, I would remain cautious about selling, as the construction of a corrective wave can begin at any moment. I do not recommend buying within the correction.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are still some differences. The downward corrective trend segment continues its construction, and its first wave has already taken on an extended form and is definitely unrelated to the previous uptrend segment.
The material has been provided by InstaForex Company – www.instaforex.com
The wave analysis for the pound/dollar pair remains quite simple and understandable. The construction of a new downward trend segment, its first wave, continues, and it is significantly prolonged in time. In my opinion, the British pound has no reason to resume its uptrend, so I don’t even consider the scenario of a new upward segment. The first wave of the descending trend segment has already taken on a very prolonged form, but demand for the pound continues to remain low. I remind you that there are no specific target sizes for waves. The first wave can be constructed for as long as necessary without any restrictions.
The internal wave structure of the first wave of the new trend segment looks complex, and it is difficult to discern five waves within it. But five waves are visible in the euro currency. If the construction of the bearish set of waves is completed for the euro, then, with an 80% probability, it will be completed for the pound as well. However, the pair has made a second successful attempt to break through the 1.2120 level, which corresponds to 76.4% according to Fibonacci, and this does not provide grounds to expect the completion of the first wave. At the moment, it is possible to rely on the euro, which has signs of completing the first wave.
The British pound still lacks support from the news background.
The pound/dollar currency pair rose by 60 basis points on Wednesday. The increase in the quotes of the British currency began in the morning, which is quite strange since only the Business Activity Index in the UK services sector was released in the morning. It exceeded market expectations but still remained lower in September than in August, at 49.3 versus 49.5. The increase in the pound started one and a half hours before the release of this report, so I conclude that it is not related at all. The market begins to wonder if the first wave is too prolonged, and it’s time to start building corrective wave 2 or b. The news background does not help buyers; on the contrary, it constantly confuses them.
On Monday, the US ISM Manufacturing Index turned out to be much better than market expectations, at 49 points, boosting demand for the dollar. On Wednesday, the ISM Non-Manufacturing Index was in line with forecasts (53.6) and did not cause the US currency to fall in price. Yesterday, the JOLTS report exceeded expectations and also kept the US currency from falling. In other words, every day the market received some reason that prevented it from starting a full-fledged sell-off of the US currency. I also want to note that today’s ADP report turned out to be much worse than expected, leading to a 50-point drop in the US currency, but the overall news background still supports the dollar more often than it causes it to fall. Based on everything said in these two articles, the chance of starting a corrective wave lies only in an unsuccessful attempt to break through the 1.0463 level for the euro.
General Conclusions
The wave pattern of the pound/dollar pair suggests a decline within a new downward trend segment. The maximum that the British pound can expect in the near future is the construction of wave 2 or b. But as we can see, even with a corrective wave, significant problems arise. At the moment, I would remain cautious about selling, as the construction of a corrective wave can begin at any moment. I do not recommend buying within the correction.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are still some differences. The downward corrective trend segment continues its construction, and its first wave has already taken on an extended form and is definitely unrelated to the previous uptrend segment.
The material has been provided by InstaForex Company – www.instaforex.com
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