For the pound/dollar instrument, the wave marking looks quite complicated but does not require any clarifications. We have a supposedly completed downward trend segment consisting of five waves (a-b-c-d-e). We also have a three-wave upward trend section, which can take a more extended form (a-b-c-d-e). Thus, I expect the increase in the instrument's quote will continue, but it will be a wave of growth. The news background could be interpreted in any direction lately, as both central banks raised their interest rates, and on Friday, we saw the dollar fall against the news background, which could lead to its new growth. All this leads me to believe that the market has decided to complete a full-fledged five-wave structure, after which it will decide on building a new downward trend section. Consequently, the British pound may grow to 17-18 figures in the near future. An unsuccessful attempt to break through the 1.1704 mark, which equates to 161.8% by Fibonacci, will indicate the readiness of the market for new sales and may mark the beginning of the construction of a new descending section.
The unexpected growth of the instrument complicated the situation.
The exchange rate of the pound/dollar instrument increased by 160 basis points on November 7. However, as of Friday's close, the increase was only 95 points. Also, a lot, but still not 160. There was no news background on Monday. This week, most of the events are connected with speeches by representatives of the ECB, the Fed, and the Bank of England. They may give important comments on monetary policy, but they may not say absolutely anything new and interesting. The situation is 50-50.
However, this week there will still be a very important event that can largely affect the future movements of both instruments. The US inflation report, which will be released on Thursday, may show a strong or weak decline. By a slight decrease: - 0.1-0.2% y/y. Under strong – anything more than 0.2% y/y. The Fed's decision on the rate at its last meeting of the year in December will depend on the significance of this report. Jerome Powell said last week that the regulator would discuss the issue of reducing the pace of monetary policy tightening, but, in my opinion, if the decline in inflation is minimal, the Fed may decide on another major interest rate hike. By 0.75%. It will be the fifth in a row. If the slowdown in inflation is small, then we can expect an increase in demand for the US dollar. If both instruments go beyond the peaks of their c waves by Thursday, this may be when the construction of new downtrend sections begins. The wave markings of the British and the European are now the same, so I'm counting on their having identical movements in the future.
General conclusions.
The pound/dollar instrument wave pattern assumes the construction of a new downward trend segment, but it will probably start later. Now I advise buying the instrument on MACD reversals "up" with targets near the estimated mark of 1.1711, which equates to 161.8% Fibonacci. There is a possibility that the upward section has been completed, and now we are observing the construction of a corrective upward wave as part of a new downward section. Therefore, you need to be careful with purchases.
The picture is very similar to the Euro/Dollar instrument at the higher wave scale, which is good since both instruments should move similarly. At this time, the upward correction section of the trend is nearing completion. If this is the case, we will soon be building a new downward trend.
