The wave analysis for the pound/dollar pair remains relatively simple and understandable. The construction of a new downtrend is continuing, and the first wave of this trend has been significantly prolonged. In my view, there is no reason for the British to resume an upward trend, so I don't even consider such a scenario. I would like to remind you that there are no specific target sizes for waves. The first wave can continue to be constructed for an indefinite amount of time without any restrictions. At the moment, everything indicates that this wave is complete, but there is still a probability of its further extension.
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. However, five waves are visible for the euro currency. If the construction of a downward wave set is completed for the euro, then with an 80% probability, it will also be completed for the pound. The first wave for the euro has been completed with a high degree of probability. Demand for the pound has been increasing in recent days, so I expect the construction of wave 2 or b in the near future.
The Producer Price Index helped the pound.
The pound/dollar exchange rate increased by 30 basis points on Wednesday, which is a small increase. The total deviation of quotes from the lows reached last week is now about 280 points. This is already a significant deviation, and confidence in the construction of wave 2 or b is growing with each passing day. Personally, I believe that for both pairs, the construction of this wave has begun because the first wave has already taken on too extensive a form. However, in any case, trading within the second corrective wave is not recommended. It is better to wait for its completion to enter the market with new sales within the third wave.
Today, for most of the day, the market maintained a passive position, waiting for any news and reports. The report on inflation in Germany is difficult to classify as important, and in any case, it is not related to the pound. The producer price index is a kind of precursor to the consumer price index. If the producer price index decreases, a slowdown in inflation can be expected. The Producer Price Index in September accelerated to 2.2% year-on-year, with market expectations at 1.6% year-on-year. There are grounds to assume that tomorrow we will see the third consecutive acceleration of inflation in the United States. However, it is quite difficult to predict how the dollar will react to this event now.
In the past, everything was clear: if inflation rises, the currency of that country rises as the probability of further tightening by the central bank immediately increases. Now, the Fed seems to be ready to raise rates once or twice more, but yesterday Raphael Bostic stated that he does not support tightening in November. Is the door for further tightening of monetary policy slowly closing? Or should we not take the opinion of one Bostic too seriously?
General Conclusions:
The wave pattern for the pound/dollar pair suggests a decline within a new downtrend. The maximum the British pound can expect in the near future is the construction of wave 2 or b. However, as we can see, even with a corrective wave, there are significant problems at the moment. I would not recommend new sales at this time, but I also do not recommend purchases, as the corrective wave may turn out to be quite weak.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are some differences. The downward corrective trend segment continues its construction, and its first wave has already taken on an extensive form and is definitely not related to the previous upward trend.
