The wave analysis for the pound/dollar pair remains relatively simple and clear. The construction of a new downtrend phase continues, with its first wave having a rather extended appearance. In my view, there is no basis for the British pound to resume an upward trend, so I don't even consider such a scenario. The presumed wave 1 or a is complete, although for the pound, this conclusion is not as obvious as for the euro. Wave 2 or b for the euro already has a three-wave appearance, while for the pound, it does not. Certainly, the corrective wave could be as simple as possible, but I still believe it should have at least a three-wave structure. Unfortunately, the pound has been ailing since 2022, when it was practically in freefall.
The internal wave structure of the first wave of the new trend phase looks complex, and it is difficult to identify five waves within it. However, five waves are visible for the euro. If the global wave is complete for the euro, there is an 80% likelihood that it is also complete for the pound. However, when it comes to wave 2 or b, the situation is not as clear. I believe that the correction could still develop further, despite the recent decline.
The British pound is hoping for a "hawkish" outcome from the Bank of England.
The euro/dollar pair's exchange rate remained unchanged on Monday. European reports provided support for the euro but not for the British pound, which is logical. Therefore, the pound now needs to rely on US reports regarding unemployment, labor market conditions, and business activity, as well as on the meetings of the Bank of England and the Federal Reserve. Unfortunately, there isn't much to rely on here.
While certain US economic reports may fall short of market expectations, potentially offering some support for the pound this week, it is improbable that all the most crucial reports will disappoint. Consequently, the dollar may also find support. The Federal Reserve's upcoming meeting has a 99% likelihood of lacking any groundbreaking developments, with no signs pointing to an imminent interest rate hike this Wednesday. The probability is close to zero. Jerome Powell is also unlikely to present "hawkish" or "dovish" stances, indicating a neutral meeting that won't favor any specific currency.
The Bank of England's meeting is expected to mark the second pause in the tightening of monetary policy. Given persistently high inflation rates and substantial wage growth in the UK, the market might interpret the absence of a rate hike negatively. The economy has been stagnating for several quarters, which has deterred the regulator from further rate hikes. However, the market may interpret the status quo as putting even greater pressure on the pound's positions. In recent weeks, it has held on by a thread to avoid a steeper decline.
General conclusions.
The wave pattern of the pound/dollar pair suggests a decline within a downtrend phase. The maximum that the British pound can hope for is the construction of wave 2 or b. However, even with the corrective wave, significant problems are emerging. At this time, I would not recommend new sales, but I also do not recommend purchases, as the corrective wave appears relatively weak. In any case, this is a corrective wave. I would recommend selling if there is a successful attempt to break through 1.2120, but be very cautious at first.
On a larger time scale, the picture is similar to the euro/dollar pair, but there are some differences. The descending corrective phase of the trend continues to be constructed, and its first wave has already taken on an extended appearance and is clearly unrelated to the previous upward trend phase.
