The wave analysis for the pound/dollar pair now appears to be challenging, but it does not call for any clarifications. The wave patterns for the euro and the pound differ somewhat, but both point to a decrease. Our five-wave upward trend section has the pattern a-b-c-d-e and is most likely already finished. I predict that the downward part of the trend has begun and will continue to develop, taking at least a three-wave form. Although Wave B appeared to be unnecessarily prolonged, it did not cancel. Wave c is also becoming more complex and has an unnecessarily protracted, unfinished appearance. This wave's issue is that it can now end at any time. Wave c can be regarded as finished because the low of wave a has been updated. Of course, I anticipate a more significant drop in the value of the pound, but it should be emphasized that predictions do not always come true. Participants in the market may have been affected by the events at the end of last week. It is now in doubt how wave C will be built with targets so close to the 14th figure. Even inside wave c, isolating the internal waves to determine the stage of development is difficult.
On Friday and Monday, the pound/dollar exchange rate increased by 170 basis points. Given that the news context was not very favorable to the British pound, I find such a movement strange. The news context did not only not indicate such large growth, but it was also completely absent today, and on Friday, the wave analysis was disregarded. The simultaneous failure of two US banks and the rise in unemployment have caused a modest shock in the market. It might remain in this condition for a few more days, but I still want that it would get better as soon as possible so that wave c development might resume. As I previously mentioned, the UK GDP report for January came in a little bit higher than the market anticipated. But, the British pound practically made sense of it. Demand for it increased slightly on Friday morning, but other important factors contributed to the pound's rapid gain. Everyone needs to "come to their senses" as soon as possible at this time, especially today when there isn't any background news. After Friday's American news reports, I don't believe the Fed's plans have changed all that much. The labor market is still strong, unemployment is still at a low level, and inflation is still high but declining more slowly. In recent days, nothing has changed. The market does not currently believe that the Fed will increase the rate by 50 basis points, which may be a major error. Given that Jerome Powell started discussing it, I think the FOMC may very possibly make this choice. Later on, the Fed president clarified that although the rate has not yet been decided, it is vital to note that it is still a possibility.
Conclusions in general.
The development of a downward trend section is implied by the wave structure of the pound/dollar pair. Currently, it is possible to take into account sales with targets positioned around the 1.1641 level, which corresponds to 38.2% by Fibonacci, by the "down" reversals of the MACD indicator. The peaks of waves e and b could be used to place a Stop Loss order. Wave c might be shorter in duration, but for the time being, I anticipate a minimum 300–400 point decline.
The picture resembles that of the euro/dollar pair at higher wave scales, but there are still minor distinctions. The upward correction part of the trend has now been finished. If this presumption is true, then we should expect the downward section will continue to be built for at least three waves, with the possibility of a decline in the area of 14–15 figures.
