The wave counting for the Pound/Dollar instrument continues to look quite convincing. If the current wave pattern is correct, then the construction of the last wave in C has now been completed. An increase in the quotes of the instrument in recent days may mean that the entire downward section of the trend has completed its construction.
If this is indeed the case, then at this time, a new upward trend section begins its construction, which may also turn out to be corrective in nature. Also, the increase in quotes may begin as part of the global wave D, after which a new decline in the British pound will begin as part of wave E.
In general, the situation with the waves has become a little clearer thanks to the meetings of the Bank of England and the Fed, but at the same time, the corrective essence of the movements in 2021 leaves a fairly large number of possible scenarios. However, we will not think about alternative scenarios yet. So far, the construction of an upward wave has begun, which means that it should be worked out.
European Central Bank raised the interest rateThe exchange rate of the Pound/Dollar instrument increased by 30 basis points during Wednesday (taking into account the decline during the day), and on Thursday – by 90. Thus, the last two days have been favorable for the pound. If it manages to continue the course it has gained, it will be able to build a new upward section. However, the news background from the UK is now very sad. And one rate increase by the Bank of England by 0.15% may not cover all the sad news that has been coming in recent weeks and months.
However, as in the case of waves, I think it makes no sense to plunge headlong into the negative right now. The pound sterling has received market support and now it needs to be developed in order to at least build wave D. And when this wave shows signs of its completion, it will be necessary to think whether the markets are ready to build a new downward wave, which will be interpreted as E as part of a downward trend segment.
Some economic reports were also present in the UK on Thursday. The index in the manufacturing sector was recorded at 57.6 points from the previous 58.1, and the services sector at 53.2 from 58.5 points. However, these reports did not affect the general mood of the markets in any way. In the US, business activity in the manufacturing and services sectors also declined, but much less than in the UK. Industrial production rose 0.5% in November, which is only slightly below market expectations.
However, in general, all these reports could only have an indirect impact on the instrument on Thursday. The British pound has grown, but after two meetings of central banks at once, at which important decisions were made, its growth no longer looks excessive.
General conclusions
The wave counting of the Pound/Dollar instrument looks quite convincing now. The supposed wave e could complete its construction. Thus, now I would advise buying the tool with targets located near the estimated mark of 1.3457, which corresponds to 50.0% Fibonacci level since the attempt to break through the 61.8% Fibonacci level was successful.
Starting from January 6, the construction of a downward trend section continues, which can turn out to be almost any size and any length. At this time, the proposed wave C may be nearing its completion (or completed). However, the entire downward section of the trend may lengthen and take the five-wave form A-B-C-D-E.