The fate of the British pound next week will likewise not be in the hands of the Brits themselves. There will be extremely few news items in the UK, and none that can be singled out as important from the full list of events. The market may continue building a corrective wave sequence, which remains the most plausible scenario for the first whole trading week of 2026. In my view, market participants will be inclined to sell, while the news flow (especially the American one) will either slow the decline of both instruments or accelerate it.
Obviously, all U.S. news (we still do not know how the market will react to Maduro's arrest and Trump's announcement to "help Cuba") cannot be purely positive or purely negative. Therefore, the direction of movement may change during the week. The current wave count for GBP/USD suggests a corrective wave sequence or even a new trend segment within wave 4, however the problem with corrective waves is precisely that it is extremely difficult to say where a given wave will end and what structure it will take.
From current levels, wave D in 4 may begin to form, with targets located below the 30?figure. A wave 4 within an upward wave sequence with the prospect of renewed growth may also start to develop. Therefore, it would be very helpful if next week's news flow had a clear bias and truly aided trading decisions.
Given all of the above, the first week of 2026 may prove rather difficult. The news flow may constantly change its character, and the market, it seems, has not yet decided how it intends to act in January.
Wave picture for EUR/USD:
Based on the analysis of EUR/USD, I conclude that the instrument continues to build an upward section of the trend. Trump's policies and the Fed's monetary policy remain significant factors in the long-term decline of the U.S. currency. Targets for the current trend section may extend up to the 25th figure. The current upward wave set may not be complete, but three waves have been constructed. If it develops further, one should expect growth with targets around 1.1825 and 1.1926, which correspond to 200.0% and 261.8% Fibonacci. But in the near term, a corrective wave or a set of waves may be forming.
Wave picture for GBP/USD:
The wave picture for GBP/USD has changed. The downward corrective structure a-b-c-d-e in C of 4 appears complete, as does the entire wave 4. If that is indeed the case, I expect the main trend section to resume with initial targets around the 38 and 40 figures.
In the short term, I expected wave 3 or c to form, with targets around 1.3280 and 1.3360, which correspond to the 76.4% and 61.8% Fibonacci levels. These targets have been reached. Wave 3 or c has presumably completed its formation, so in the near term, a downward wave or a set of waves may be observed.
Main principles of my analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to trade and often change.
- If there is no confidence in what is happening in the market, it is better not to enter it.
- There is never and can never be 100% confidence in the direction of movement. Do not forget protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
