The wave analysis for the pound/dollar pair remains reasonably clear while also becoming more complex. The construction of a new bearish trend segment continues, with the first wave taking on a relatively extensive form. The second wave has also become lengthy, giving us every reason to expect an extended third wave.
At the moment, I'm not entirely certain whether the construction of wave 2 or b is completed. The pullback from the highs is too small to consider it a guaranteed start of wave 3 or c. Wave 2 or b has already taken on a five-wave appearance, but it remains corrective and should be completed soon (or may have already done so). However, we continue to observe the formation of new internal waves, which are currently challenging to associate with a specific higher-scale wave.
The targets for the downward movement of the pair 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 giving up on the working scenario, but several unsuccessful attempts to break the 38.2% Fibonacci level suggest that the market is not yet ready for selling right now.
The pound cannot break the 1.2627 mark.
The pound/dollar currency pair experienced a 10-point drop on Tuesday. Bulls initially held the initiative during the day, but bears quickly took control. While the movements were strong on paper, the most potent impulse of the day (bearish) amounted to just 50 basis points. Market activity remains very low.
However, there is a quite apparent explanation for this. Two explanations. First, the news background has been absent for several days. Second, next week will feature the Bank of England (BoE) and Federal Open Market Committee (FOMC) meetings, which could significantly impact both the pound and the dollar or the market's sentiment toward them.
What does the pound need right now? For Andrew Bailey to signal a forthcoming interest rate cut. This is easy to believe, as inflation in the UK remains twice the target rate.
What does the dollar need? For Jerome Powell to convey that there will be no monetary policy easing in March. Even better, if he suggests there is little likelihood of the Fed lowering rates in May. In other words, the more hawkish the Fed's stance, the greater the probability of breaching the ironclad level of 1.2627, which has prevented the market from proceeding to build wave 3 or c.
General Conclusions:
The wave picture for the pound/dollar pair implies 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 do so at any moment. There are already some signs of its completion. However, I recommend staying calm with sales right now. Since the movement has been horizontal for a month, I would wait for a successful attempt to breach the 1.2627 level. After that, believing in further pair depreciation will become much more straightforward.
The picture is similar to the euro/dollar pair on a larger wave scale, but some differences exist. The downward corrective trend segment continues to evolve, and its second wave has taken on an extensive form, reaching 61.8% of the first wave. An unsuccessful attempt to break this level could lead to the start of wave 3 or c.
