The wave analysis for GBP/USD remains quite complex. For several months now, we have been observing movements between the Fibonacci levels of 50.0% and 23.6%. Horizontal movement is not the best for wave analysis. As I have already noted, the wave pattern should be simple and understandable to work with. Currently, there needs to be more simplicity and clarity. If the presumed wave 2 or b is indeed completed, then the construction of the expected wave 3 or c has begun. However, there are many doubts about this scenario because the market is currently in another sideways movement.
Moreover, only the British pound is in a sideways movement. The euro, which usually trades similarly 80% of the time, is in the process of building a downward trend. From this fact alone, we can understand that something is wrong with the pound. If this is visible to the naked eye, trading the pound is associated with increased risks. In the current situation, my readers can only continue to hope for the construction of wave 3 or c, the targets of which are below the low of wave 1 or a. Therefore, the pound should decrease by at least 600 basis points.
The pound started to retreat from the 25-figure mark.
The GBP/USD exchange rate rose by 75 basis points on Wednesday and increased by another 25 today. Yesterday, the market traded the British pound even more logically than the euro, although in the past few months, everything was completely the opposite. However, on Wednesday, the market stood still until the evening when the ISM Non-Manufacturing Index was released in America, which turned out to be weaker than expected. It was after this report that we saw the British pound rise by 75 points. Today, the dollar's decline also began only after the initial jobless claims report, which came in at 221,000, against the market's expectations of 214,000. The difference is small, but after the pair once again failed to begin building a downward wave 3 or c, the market is again more inclined to buy the British currency.
It remains the last day of the week, which nonfarm payroll reports, the unemployment rate, and wage levels in the USA will mark. Undoubtedly, the market's main attention will be focused on payrolls. It is expected that in March, the indicator will reach 200,000 new jobs, so any value below this mark will be a reason for an additional reduction in demand for the US currency. Since the GBP/USD pair is in a horizontal movement, in the grand scheme of things, it doesn't really matter which direction the market chooses tomorrow. The overall direction will not change because of it.
General Conclusions
The wave pattern of the GBP/USD pair still suggests a decline. At the moment, I am still considering selling the pair with targets below the 1.2039 mark, as wave 3 or c will sooner or later develop. However, until wave 2 or b is completed with one hundred percent certainty, we can expect the pair to rise to the 1.3140 mark, which corresponds to a 100.0% Fibonacci retracement. The deviation of quotes from the recent highs is still too small to be confident at the beginning of wave 3 or c.
On a larger wave scale, the wave pattern is even more revealing. The downward correctional trend continues its formation, and its second wave has taken on an elongated form - up to 76.4% of the first wave. An unsuccessful attempt to break through this mark could have led to the start of wave 3 or c.
The main principles of my analysis are:
- Wave structures should be simple and understandable. Complex structures are difficult to play, as they often change.
- If there is confidence in what is happening in the market, it is better to avoid entering it.
- There is never one hundred percent certainty about the direction of movement. Remember about Stop Loss protective orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
