The wave pattern for GBP/USD continues to indicate the development of a bullish impulse wave structure. The wave configuration closely mirrors that of EUR/USD, as the U.S. dollar remains the dominant driver. Demand for the dollar is decreasing across the broader market (in the medium term), which is why many instruments are displaying similar dynamics. Currently, a corrective wave set is forming within wave 4. If this assumption is correct, the decline could soon come to an end, as the structure has taken on a classic three-wave formation.
It's important to remember that much of the currency market right now depends on Donald Trump's policies—not just trade-related ones. Positive data from the U.S. continues to appear, but the market remains wary due to persistent uncertainty in the economy, Trump's contradictory decisions and statements, and the White House's hostile and protectionist international stance. As a result, the dollar needs strong backing to turn even good news into increased demand.
The GBP/USD pair dropped by another 50 basis points on Thursday, although this outcome could have been avoided. There were no significant news releases from the UK this week, and the market has already had time to respond to yesterday's GDP report and the outcome of the Federal Reserve meeting. Nevertheless, demand for the U.S. dollar continues to grow, and there are concerns we could be facing a repeat of January 2025.
Recall that in January this year, the instrument was in a downtrend phase. However, Donald Trump had just taken office and immediately began implementing a protectionist agenda, attempting to reshape global trade by issuing directives to half the world's nations. At the time, market participants rightly believed Trump's actions would primarily harm the U.S., as few expected the trade deals to be so favorable to the American economy. But by July 2025, it became clear that all the agreements signed by Trump were indeed extremely beneficial for the U.S. economy. Economic growth in the second quarter virtually offset the first quarter's contraction. Consequently, market sentiment (at least theoretically) may have turned bearish in July. Earlier, there were concerns about a potential recession, inflation, and a trade war. Now it's apparent that a recession is unlikely, the trade war has taken on a more diplomatic tone, and many of America's partners are willing to pay nearly any price to maintain access to the U.S. market. As a result, the situation is now shifting in favor of Trump, the U.S., and the dollar.
While I don't yet believe that a full-fledged downtrend is beginning, it must be acknowledged that the news background is quickly turning from negative to positive for the U.S. currency.
Conclusions
The wave structure for GBP/USD remains unchanged. The pair is in the midst of a bullish impulse trend segment. Under Donald Trump, markets may continue to face numerous shocks and reversals, which could significantly impact the wave structure. However, for now, the working scenario remains intact. The target for the bullish trend segment is now located around the 1.4017 level. Currently, a corrective wave set is forming within wave 4. By classic standards, it should consist of three waves, and we are currently observing the development of wave C.
Core Principles of My Analysis:
- Wave structures should be simple and clear. Complex patterns are hard to interpret and frequently subject to revision.
- If you're uncertain about the market, it's better not to enter.
- There is never 100% certainty in market direction. Always use protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
