The wave analysis for the GBP/USD pair has currently changed its appearance to a simpler and more understandable one. Instead of a complex corrective trend segment, we may see an impulsive upward movement or a simpler corrective one. The formation of an ascending wave 3 or c is continuing, and the British pound has an excellent opportunity to rise towards the 30th figure. Considering the current news background, it is up to you to decide how justified this is. The British pound has no grounds to continue rising towards the 30th or 35th figure (which is possible if it is an impulsive trend segment). Even the presumed wave 3 or c may have already been completed. Wave analysis can always transform into a more complex one, but I prefer to rely on its simpler manifestations as they are easier to work with.
A descending set of waves is expected for the euro currency, but the wave analysis may transform into a similar one as the pound, and then everything will fall into place. The 161.8% Fibonacci level and two unsuccessful attempts to break through it indicate a readiness for a decline. However, within wave 3 or c, there should be a five-wave structure, which implies at least one more upward wave.
Demand for the British pound continues to decline gradually. The GBP/USD exchange rate increased by 30 basis points on Monday, but the amplitude of movements was very low. The news background today was weak but not absent. In the US, three reports were released simultaneously, which were interesting to the market and supported the dollar. However, the demand for the US currency hardly increased, which leads me to think about the pair's readiness to build another upward wave, as I mentioned earlier.
The market is still under the influence of last week's Bank of England meeting. Although the demand for the British pound did not increase after the regulator raised the interest rate by 50 basis points, the downward movement of the pound's quotes has been minimal since then. This means that the decrease in demand for the pound is insignificant, and the increase in demand for the dollar is not happening. Indirectly, such a balance of power between bears and bulls indicates a possible awakening of the latter. The Bank of England, with its June decision, made it clear to the market that it can raise the interest rate regardless of anything to "crazy" levels. Some analysts are already expecting an increase of 6%, which, a couple of months ago, no one could even imagine.
However, economists also warn that the risks of recession and a banking crisis, in this case, will increase several times. The UK economy has been showing zero growth for a year but is not yet in a recession. The higher the interest rate rises and the longer it remains high, the more difficulties and problems banks will face. And we have already seen large banks go bankrupt this spring. Britain cannot avoid economic and banking sector crashes.
General conclusions:
The wave pattern of the GBP/USD pair has changed and now suggests the formation of an ascending wave, which could end at any moment. Consider buying the pair only in case of a successful breakout above the 1.2842 level. Selling positions can also be considered, as two attempts to break through this level have been unsuccessful, and a stop-loss order can be placed above it. However, wave 3 or c may take on a five-wave structure.
The picture resembles the EUR/USD pair on a larger wave scale, but there are still some differences. The descending corrective trend segment is complete, and the formation of a new upward segment is ongoing, which could end as early as tomorrow or take on a complete five-wave structure. The third wave can be extended or truncated even if it takes a three-wave form.
