For the pound/dollar pair, the wave analysis remains quite clear while continuing to become more complicated at the same time. The construction of a new downward trend segment persists, the first wave of which has taken on a quite extended form. The second wave also turned out to be quite extensive, giving us every reason to expect the prolonged construction of the third wave. At the moment, I am not entirely confident that the construction of wave 2 or b is complete. The retreat of quotes from the reached peaks is too small to consider it a guaranteed start of wave 3 or c. The rise in the quotes of the British pound against the backdrop of the meetings of the Bank of England and the Federal Reserve led to a significant increase, and now wave 2 or b takes on a five-wave form. However, it remains corrective and should be completed soon. Targets for the decline of the pair within wave 3 or c are located below the level of 1.2039, corresponding to the low of wave 1 or a.
Unfortunately, wave analysis tends to become more complicated, and the news background does not pay much attention to the wave pattern and does not try to correspond to it. At the moment, I am not abandoning the working scenario, but there is a risk of transforming the entire wave structure.
Andrew Bailey sank the dollar following Jerome Powell.
The exchange rate of the pound/dollar pair increased by another 115 basis points on Thursday after rising by 55 on Wednesday. In just two incomplete days, the British pound rose by 2 figures, and undoubtedly, such a movement was associated only with the meetings of the Bank of England and the Federal Reserve. I remind you that yesterday Jerome Powell openly stated that the likelihood of new tightening of monetary policy is negligible, and today Andrew Bailey announced that he is not sure the rate has reached its peak. The latter statement hints to the market that the rate of the British regulator may be raised again. And it doesn't matter whether it is true or not.
I believe that the Bank of England can certainly raise the rate again but is unlikely to do so. After all, inflation in the UK is decreasing, but it was initially much higher than in the United States or Europe, so it takes more time to return to the target level. The Bank of England is afraid that at some point, the Consumer Price Index will start rising again, so it leaves the door open for itself on the issue of raising the interest rate. In reality, only three members of the Monetary Policy Committee support another rate hike. Their number may increase to 5 only if inflation starts to rise sharply.
Based on all of the above, I can say that the British pound rose yesterday and today quite logically, but its further increase is still doubtful. Fate favored the rise of the British pound over the past 24 hours, but it will not always be the case. From the current levels, a sharp decline can already be expected.
General Conclusions:
The wave pattern of the pound/dollar pair implies a decline within the descending wave 3 or c. At the moment, I can recommend selling the pair with targets located below the level of 1.2039 because wave 2 or b must ultimately be completed and can be completed at any time. The longer it turns out, the stronger the fall of the British pound will be. The peak of the presumed wave c in 2 or b can be used for sales, and the order limiting possible losses on transactions can be placed above it.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are still some differences. The descending corrective trend segment continues its construction, and its second wave has already taken on an extended form – at 61.8% of the first wave. An unsuccessful attempt to break through this level may lead to the start of the construction of 3 or c.
