For the pound/dollar pair, wave analysis remains fairly clear and, at the same time, continues to become more complex. The construction of a new downward trend segment continues, the first wave of which has a very elongated 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 confident that the construction of wave 2 or b is complete. The retreat of quotes from the peaks reached needs to be bigger to consider it a guaranteed start of wave 3 or c. The increase in the pound's quotes against the backdrop of the Bank of England and the Federal Reserve meetings led to a significant rise, and now wave 2 or b has taken on a five-wave appearance. However, it remains corrective and should be completed soon. Targets for a decline in the pair within wave 3 or c are located below the 1.2039 level, corresponding to the low of wave 1 or a.
Unfortunately, wave analysis tends to become more complex, and the news background does not try to correspond to it. At the moment, I am not abandoning the working scenario, but the danger of transforming the entire wave structure is present.
The pound/dollar pair increased by 45 basis points on Friday. This movement did not lead to the assumed wave 2 or b complications, so the current wave analysis remains the same. However, the pair once again increased at the end of the day. It increased when it could have fallen, which would have been much more expected. However, this did not happen again. In the review of the euro/dollar pair, I mentioned that today's US statistics could lead to a strengthening of the dollar. In addition to these US reports, there were also British ones. Let's examine them; they contributed to the pound's strengthening in the first half of the day and in the second.
The first report on retail sales turned out to be good. Volumes grew by 1.3%, while market expectations were only +0.4% monthly. However, the second (more important) report on the British GDP in the third quarter was worse than market expectations. The British economy contracted by 0.1% quarterly, while market expectations were 0%, as were the two previous indicator estimates. How much did the pound fall after this report? Not at all.
The market interpreted all the day's reports in favor of the pound. No matter how much you look for explanations for such movements of pairs, it will not become more logical. As long as wave 2 or b retains its current form, if the market constantly increases demand for the pound, then the question of its complication is only a matter of time.
General Conclusions.
The wave pattern of the pound/dollar pair suggests a decline within the descending wave 3 or c. I am considering selling the pair with targets below the 1.2039 level because wave 2 or b should ultimately be completed and can end at any time. And the longer it turns out to be, the stronger the decline in the pound will be. The peak of the assumed wave e in 2 or b can be used for sales, and the order limiting possible transaction losses can be placed above it.
The picture is similar to the euro/dollar pair on the larger wave scale, but some differences remain. The descending correctional trend segment continues its construction, and its second wave has already acquired an elongated form – at 61.8% from the first wave. An unsuccessful attempt to break this level may lead to the start of building 3 or c.
