Regarding the GBP/USD pair, the wave analysis remains relatively clear but continues to become more complex at the same time. The construction of a new bearish trend segment is ongoing, with the first wave taking on a quite extensive form. The second wave has also turned out to be quite lengthy, which gives us every reason to expect the prolonged development of the third wave.
Currently, the construction of wave 2 or b still needs to be completed. The pullback from the peaks is too small to guarantee the start of wave 3 or c. Wave 2 or b has already taken on a five-wave structure, but it remains corrective and should conclude soon (or may already be complete). Nevertheless, we continue to observe the construction of new and additional internal waves, which are currently challenging to attribute to any larger-scale wave.
The targets for the pair's decline within the presumed 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 only sometimes aligns with it. At this time, I am not abandoning the working scenario, but a few unsuccessful attempts to break the 38.2% Fibonacci level indicate the market's reluctance to sell right now.
The British pound will only decline once it crosses 1.2627
The GBP/USD pair rate remained unchanged on Thursday. Yesterday, the British pound saw a relatively high range and strengthening due to the report on British inflation, which showed a value completely different from what the market had expected. British inflation accelerated in December when most market participants were anticipating a decrease. Consequently, the increase in demand for the pound was predictable, as the Bank of England may now adopt a more "hawkish" position than the market had previously anticipated.
Unfortunately, the report on British inflation coincided with another attempt to break the 1.2627 level. If the pair had initially broken through this level and then (even a few hours later) the inflation report had been released, we would have had at least a breakthrough of an important level. There is no breakout, and the inflation report triggered another increase in demand for the pound. The British pound remains in a horizontal range between the 38.2% and 23.6% Fibonacci levels, and how much more time it will spend between these levels is anyone's guess.
The pair is still ready to develop a descending wave 3 or c, but almost everything depends on the 1.2627 level. The market must establish the pound below it before it can count on the development of an impulse downward wave. Today and tomorrow's news background is unlikely to influence the market's sentiment enough to trigger the long-awaited breakout at 1.2627.
General conclusions.
The wave pattern of the GBP/USD pair suggests a decline. I am considering selling the pair with targets below the 1.2039 level because wave 2 or b should ultimately conclude and may end at any moment. There are already some signs of its completion. However, I do not recommend rushing to conclusions and sales. I would wait for a successful attempt to break through the 1.2627 level, after which it will become much easier to believe in further pair decline.
The picture is similar to the euro/dollar pair on a larger wave scale, but there are still some differences. The descending corrective trend segment continues its development, and its second wave has already taken on an extensive form, reaching 61.8% of the first wave. An unsuccessful attempt to break through this level may lead to the start of wave 3 or c.
