For the GBP/USD pair, the wave analysis remains quite complicated. A successful attempt to break through the 50.0% Fibonacci level in April indicated that the market was ready to build a downward wave of 3 or C. If this wave really continues its construction, then the wave pattern will become much simpler and the threat of complication of the wave analysis will disappear. However, in recent weeks, the pair has remained the same, which again makes us doubt the readiness of the market for sales.
In the current situation, my readers can still count on building wave 3 or c, the targets of which are located below the low of wave 1 or a, the mark of 1.2035. Consequently, the British dollar should decrease by at least 600-700 more base points from current levels. With such a decrease, wave 3 or c will turn out to be relatively small, so I expect a much larger drop in quotes. It may take a lot of time to build the entire wave 3 or c. Wave 2 or b has been under construction for 5 months, and this is only a corrective wave. Building a pulse wave can take even longer. The last corrective wave turned out to be very long, and it still could not complete its construction, jeopardizing the entire wave layout.
Unemployment in Britain did not upset buyers.
The exchange rate of the GBP/USD pair did not change on Tuesday, but this is exactly what caused confusion. In Britain, three fairly important reports were released today, two of which unexpectedly turned out to be worse than expected for the market. The unemployment rate rose to 4.4% against expectations of 4.3%, and the number of applications for unemployment benefits increased by 50 thousand, although the market expected an increase of only 10 thousand. I cannot say that these two reports are of secondary importance to the market, but the pound sterling has been declining for only a very short time. Literally, an hour later, the demand for it began to grow again; it is unclear why.
The third report is on salaries. Average wages increased in April, including bonuses, by 5.9% (which is higher than market expectations), and excluding bonuses – by 6% (which corresponds to market expectations). A slightly stronger increase in wages could cause an increase in demand for the British, as it potentially creates a new threat to the Bank of England. Andrew Bailey has already said that wages in the country are growing too fast, which negatively affects the process of slowing inflation. However, today, the market saw only the salary report and chose not to take unemployment into account.
Based on all of the above, the Briton again had a chance to "fall from heaven", but the market preferred to do without sales. The corrective upward wave still cannot be considered complete.
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 located below 1.2039, as wave 3 or c has not yet been canceled. Since the pair is trying to form a reversal near the 1.2822 mark, as well as near the peak of the expected wave 2 or b, then the sale of the pair can be considered with the first targets located near the 1.2315 mark. But very carefully since the market is extremely reluctant and rarely increases demand for the US currency.
At the higher wave scale, the wave pattern is even more eloquent. The downward correction section of the trend continues to build, and its second wave has acquired an extended appearance – by 76.4% of the first wave. An unsuccessful attempt to break through this mark could lead to the beginning of building 3 or c, but a corrective wave is currently being built.
The basic principles of my analysis:
1) Wave structures should be simple and understandable. Complex structures are difficult to play out; they often bring changes.
2) If you are not sure what is happening in the market, it is better to avoid entering it.
3) There is no absolute certainty in the direction of movement, and there can never be. Remember about Stop Loss protection orders.
4) Wave analysis can be combined with other types of analysis and trading strategies.
