For GBP/USD, the wave structure continues to indicate the formation of an upward trend segment (see lower chart), although in recent weeks it has taken on a complex and ambiguous form (see upper chart). The pound has declined too sharply, making the trend segment that began on August 1 appear uncertain. It is likely that wave c of 4 has taken the shape of a five-wave corrective pattern. If that is indeed the case, then the rise in quotations should resume within a new upward wave sequence, forming part of the anticipated wave 5.
The downward wave sequence that began on September 17 could theoretically become even more extended and complex. However, in any case, it still has a corrective nature, meaning that the current decline in the instrument is a correction—one that has dragged on for quite a while.
At the moment, much on the currency market depends on Donald Trump's policies. The news background remains extremely unfavorable for the U.S. dollar. The fact that the market is currently ignoring a large number of significant factors is somewhat discouraging, as instead of a logical upward trend, we've been observing a series of complex corrective structures for several months in a row. For both major pairs, the a-b-c-d-e wave formations appear to be complete.
The GBP/USD rate remained virtually unchanged on Friday, after rising by 80 points the day before. Recall that yesterday the Bank of England (BoE) held its monetary policy meeting, the outcome of which could have been interpreted either way. On the one hand, the BoE decided not to cut interest rates. On the other hand, the number of policymakers voting for easing was higher than expected.
However, I do not believe that the BoE's decision or its updated inflation and GDP forecasts were the cause of the pound's strengthening. The base-case scenario was for a pause in easing, and that is exactly what happened. The BoE expects inflation to slow in 2025–2026, but whether that will happen in practice remains to be seen. Growth forecasts were lowered, and economic growth in the UK was already weak. Overall, the meeting offered very few positive factors for the pound.
At the same time, the U.S. news background creates far more problems for the dollar. Over the past month, the market has ignored Trump's new tariffs, the government shutdown, the weak U.S. labor market, and many other factors. Now the market may begin to catch up with reality.
The wave structure also suggests the formation of a new upward trend segment, with targets near the 1.38 level and higher. If upward movement does not begin soon, the wave count will become even more complicated, which is not desirable. Today's news background was very weak and did not influence market sentiment.
General Conclusions
The wave picture for GBP/USD has changed. We are still dealing with an upward, impulsive trend segment, but its internal structure is becoming more complex. Wave 4 has taken a three-wave form, and its structure is several times longer than wave 2. The latest downward corrective structure is nearing completion — or may already be complete. I continue to expect the main upward wave formation to resume soon, with initial targets near 1.38 and 1.40, and I believe this may happen in early November.
The larger-scale wave structure looks almost perfect, even though wave 4 slightly exceeded the top of wave 1. However, I'll remind you that perfect wave structures exist only in textbooks. In practice, things are far more complicated. At the moment, I see no reason to consider alternative scenarios to the bullish trend continuation.
Key Principles of My Analysis
- Wave structures should be simple and clear. Complex patterns are difficult to trade and often lead to revisions.
- If you are uncertain about market conditions, it's better to stay out.
- Absolute certainty about market direction is impossible. Always use protective Stop Loss orders.
- Wave analysis can be combined with other forms of analysis and trading strategies.
