For a long time, the market only studied inflation and central banks' interest rates to understand how to trade in the currency market. That time has passed. Currently, neither inflation, interest rates, nor rate rumors play a decisive role. Let me explain why. Today, consumer price indices for the European Union and the United Kingdom were released. The market's reaction to this data was minimal. It can be said that the inflation data turned out to be quite dull since the changes were practically imperceptible. However, the situation has changed. Central banks' interest rates have reached their peak values. All three central banks almost openly state that no further interest rate increases are required. And if a decision to tighten is made, it will be an emergency intervention in case inflation gets out of control again.
Based on all the above, the market is currently calm. At the moment, there are no events or reports that could force market participants to drastically change their attitude towards the euro, the pound, or the dollar. With this conclusion, I assume that the wave pattern will remain the primary factor determining the movement of currency pairs.
Until the end of the week, we still have to review Jerome Powell's speech and the retail sales report in the UK. Given that the market ignored two inflation reports, it is unlikely that strong data will come from these events. Powell may please or surprise, but let's think about what. If already four FOMC members have stated that a rate hike is not necessary, it is unlikely that the cautious Powell will shine with hawkish statements. Based on this, I believe that the end of the week will be uneventful. Both instruments will continue to construct corrective waves in a "resting mode." The amplitude may remain quite weak. I do not recommend working on corrective waves. There is no signal for the resumption of wave 1 or a. We can only wait.
Based on the analysis conducted, I conclude that the construction of a bearish wave set continues. The targets around the 1.0463 level have been perfectly achieved, and the unsuccessful attempt to break this level indicates the market's readiness to build a corrective wave. In my recent reviews, I warned that it is worth considering closing short positions because the probability of constructing an upward wave is currently high. The failed attempt to break the 1.0637 level, which corresponds to 100.0% on the Fibonacci scale, indicates the market's readiness to resume the decline, but I think wave 2 or b will be a three-wave one.
The wave pattern of the pound/dollar pair implies a decline within the new downtrend segment. The maximum the pound can expect in the near future is the construction of wave 2 or b. But, as we can see, even with the corrective wave, there are significant problems at the moment. I would not recommend new sales right now, but I also do not recommend buying because the corrective wave may turn out to be quite weak.
