The wave pattern for the GBP/USD pair suggests a decline within the downtrend segment. The most that we can expect from the pound in the near future is the formation of Wave 2 or b. However, there are currently significant issues even with the corrective wave. At this time, I would not recommend new short positions, but I also wouldn’t recommend longs because the corrective wave appears to be quite weak. In any case, it’s a corrective wave. You can consider shorts if the pair successfully breaches the 1.2120 mark, but you should still be cautious.The European Central Bank kept all three key interest rates unchanged. The market’s reaction was unexpected, strange, anticipated, and logical all at once. The euro initially rose by 25 pips and then lost the same amount over the course of three hours. So, the market’s response to this significant event can be characterized by a 25-pip move. However, while the event was important, its results and content were not. As mentioned, the rates remained the same, and ECB President Christine Lagarde was highly neutral during the press conference. Here’s what she talked about.
First, Lagarde stated that she believed the current level of rates is sufficiently accommodative to expect a return of inflation to 2%. Rates will need to be kept at their current levels for a reasonably long time, but eventually, the ECB will achieve its goal. Decisions on rates will be made based on inflation forecasts, incoming data, and the dynamics of core inflation. The APP and PEPP programs (monetary stimulus programs) continue to reduce the ECB’s balance sheet at a moderate pace, following the general plan.
Lagarde also stated that monetary policy is not put on the brakes, and rate decisions will be made from meeting to meeting. Thus, the “door is not closed,” but the chances of seeing new tightening in the near future are extremely slim.
I can characterize the results of the meeting as the most neutral of all possibilities. I previously mentioned that there were no other options besides keeping rates at their current levels. However, I allowed for the possibility that Lagarde might hint at future rate hikes “if necessary” or, conversely, announce when policy easing would begin. Neither of these scenarios was mentioned. Based on this, I conclude that the market’s 25-point reaction is quite in line with the meeting’s outcomes.
However, the instrument could and should have shown much greater activity, given that in the United States, at least two important reports came out, which turned out to be significantly stronger than market expectations. However, it seems that even they were ignored. Thus, the market’s reaction to the ECB meeting was logical but overall – not. The lack of market activity with such results – expected, but in conjunction with the GDP and durable goods orders reports in the United States – it’s strange.
Based on the analysis, I conclude that a bearish wave pattern is still being formed. The pair has reached the targets around the 1.0463 level, and the fact that the pair has yet to break through this level indicates that the market is ready to build a corrective wave. A successful attempt to break through the 1.0637 level, which corresponds to the 100.0% Fibonacci level, would indicate the market’s readiness to complete the formation of Wave 2 or Wave b. That’s why I recommended selling. But we have to be cautious, as Wave 2 or Wave b may take on a more complex form.
The wave pattern for the GBP/USD pair suggests a decline within the downtrend segment. The most that we can expect from the pound in the near future is the formation of Wave 2 or b. However, there are currently significant issues even with the corrective wave. At this time, I would not recommend new short positions, but I also wouldn’t recommend longs because the corrective wave appears to be quite weak. In any case, it’s a corrective wave. You can consider shorts if the pair successfully breaches the 1.2120 mark, but you should still be cautious.
The material has been provided by InstaForex Company – www.instaforex.com
The wave pattern for the GBP/USD pair suggests a decline within the downtrend segment. The most that we can expect from the pound in the near future is the formation of Wave 2 or b. However, there are currently significant issues even with the corrective wave. At this time, I would not recommend new short positions, but I also wouldn’t recommend longs because the corrective wave appears to be quite weak. In any case, it’s a corrective wave. You can consider shorts if the pair successfully breaches the 1.2120 mark, but you should still be cautious.The European Central Bank kept all three key interest rates unchanged. The market’s reaction was unexpected, strange, anticipated, and logical all at once. The euro initially rose by 25 pips and then lost the same amount over the course of three hours. So, the market’s response to this significant event can be characterized by a 25-pip move. However, while the event was important, its results and content were not. As mentioned, the rates remained the same, and ECB President Christine Lagarde was highly neutral during the press conference. Here’s what she talked about.
First, Lagarde stated that she believed the current level of rates is sufficiently accommodative to expect a return of inflation to 2%. Rates will need to be kept at their current levels for a reasonably long time, but eventually, the ECB will achieve its goal. Decisions on rates will be made based on inflation forecasts, incoming data, and the dynamics of core inflation. The APP and PEPP programs (monetary stimulus programs) continue to reduce the ECB’s balance sheet at a moderate pace, following the general plan.
Lagarde also stated that monetary policy is not put on the brakes, and rate decisions will be made from meeting to meeting. Thus, the “door is not closed,” but the chances of seeing new tightening in the near future are extremely slim.
I can characterize the results of the meeting as the most neutral of all possibilities. I previously mentioned that there were no other options besides keeping rates at their current levels. However, I allowed for the possibility that Lagarde might hint at future rate hikes “if necessary” or, conversely, announce when policy easing would begin. Neither of these scenarios was mentioned. Based on this, I conclude that the market’s 25-point reaction is quite in line with the meeting’s outcomes.
However, the instrument could and should have shown much greater activity, given that in the United States, at least two important reports came out, which turned out to be significantly stronger than market expectations. However, it seems that even they were ignored. Thus, the market’s reaction to the ECB meeting was logical but overall – not. The lack of market activity with such results – expected, but in conjunction with the GDP and durable goods orders reports in the United States – it’s strange.
Based on the analysis, I conclude that a bearish wave pattern is still being formed. The pair has reached the targets around the 1.0463 level, and the fact that the pair has yet to break through this level indicates that the market is ready to build a corrective wave. A successful attempt to break through the 1.0637 level, which corresponds to the 100.0% Fibonacci level, would indicate the market’s readiness to complete the formation of Wave 2 or Wave b. That’s why I recommended selling. But we have to be cautious, as Wave 2 or Wave b may take on a more complex form.
The wave pattern for the GBP/USD pair suggests a decline within the downtrend segment. The most that we can expect from the pound in the near future is the formation of Wave 2 or b. However, there are currently significant issues even with the corrective wave. At this time, I would not recommend new short positions, but I also wouldn’t recommend longs because the corrective wave appears to be quite weak. In any case, it’s a corrective wave. You can consider shorts if the pair successfully breaches the 1.2120 mark, but you should still be cautious.
The material has been provided by InstaForex Company – www.instaforex.com
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