For the pound/dollar instrument, the wave marking looks quite complicated at the moment but does not require any clarifications yet. The upward wave, built between May 13 and May 27, does not fit into the overall wave picture, but it can still be considered corrective as part of the downward trend section. Thus, it can now be concluded that the downward section of the trend takes a longer and more complex form. At this time, we have completed waves a, b, and d, so we can assume that the instrument continues to build wave e. If this assumption is correct, then the decline in quotes should continue in the near future. However, I remind you that if impulse structures can become more complicated and lengthen, then corrective ones are even more so. Given the news background and the fact that the Fed will not stop raising interest rates now, the entire downward trend section may take a much longer form. The wave markings of the euro and the pound differ slightly in that the downward section of the trend for the euro has an impulse form. Ascending and descending waves alternate almost identically. However, the corrective status of the trend for the British pound allows it (theoretically) to complete the wave e near the 161.8% Fibonacci level.
The threat of a recession in America does not bother the markets.
The exchange rate of the pound/dollar instrument on August 29 first decreased by 90 basis points and then increased by 90. Thus, the attempt to break through the level of 1,1708 turned out to be successful but short-lived, as the growth of the instrument began almost immediately. At the time of writing, the Briton is "at" the 1.1708 mark, and it is not yet clear in which direction he will continue to move. The descending set of waves a-b-c-d-e can be completed since the low of wave e is below the low of wave c. Nevertheless, the news background now remains such that I would assume a further decline in demand for the British. On Friday, I already said that the markets are practically not worried about the American economy, which closed two quarters in a row with a fall. And what about the British economy?
Analysts at the investment bank Goldman Sachs said that the British economy would enter a recession in the fourth quarter of 2022. Let me remind you that earlier the governor of the Bank of England, Andrew Bailey, said the economy would face a prolonged and severe recession. Goldman Sachs believes the British economy will decline by 1% by the middle of next year and will lose 0.6% during 2023. Bank analyst Sven Jari Stehn believes that the standard of living in the UK will continue to decline due to high inflation and the impending energy crisis, and the level of real consumption will fall due to rising prices. Goldman Sachs also believes that the threat of a recession will not force the Bank of England to refuse to raise interest rates. They expect the rate to rise by 50 basis points in September and then by 25 points in November and December. At the moment, analysts believe that the "baseline scenario" of a recession will be implemented; with a tougher scenario, the British economy will shrink by 3.4% next year.
General conclusions
The wave pattern of the pound/dollar instrument suggests a continued decline in demand for the pound. I advise now selling the instrument with targets near the estimated mark of 1.1112, equating to 200.0% Fibonacci for each MACD signal "down." A successful attempt to break the 1.1708 mark is ambiguous, and you need to wait sometime to ensure that the instrument will remain below it.
At the higher wave scale, the picture is very similar to the euro/dollar instrument. Thus, one thing is unambiguous – the downward section of the trend continues its construction and can turn out to be almost any length.