For the pound/dollar instrument, the wave marking looks quite complicated at the moment, but still does not require any clarifications. We have a supposedly completed downward trend segment, which consists of five waves a-b-c-d-e. We also have a three-wave upward trend section, which can take a more extended form a-b-c-d-e. Thus, I expect that the increase in the quotes of the instrument will continue, but it will be a wave of growth. The news background could be interpreted in any direction lately, as both central banks raised their interest rates, and on Friday we saw the dollar fall against the news background, which could well lead to its new growth. All this leads me to believe that the market has decided to complete a full-fledged five-wave structure, after which it will decide on building a new downward trend section. Consequently, in the near future, the British may grow to 17-18 figures. An unsuccessful attempt to break through the 1.1704 mark, which equates to 161.8% by Fibonacci, will indicate the readiness of the market for new sales and may mark the beginning of the construction of a new descending section.
British GDP may lead to the construction of a new downward trend segment
The exchange rate of the pound/dollar instrument decreased by 80 basis points on November 8. There was no news background in the UK today, but 80 points are not the distance to make edits to the wave markup. I believe that both instruments will move in almost the same way this week. Only on Friday, small differences are possible, since in Britain there will be a report on GDP for the third quarter, from which the markets do not expect anything good. It is expected that the British economy will shrink by 0.4-0.5% q/q, which will mark the beginning of the recession, which Andrew Bailey, governor of the Bank of England, spoke about a few months ago.
The recession itself can hardly surprise anyone now. The American economy may also face a recession, as well as the European one. However, if we talk about the probability of its occurrence in a particular country, then in the UK it is 100%, and in the USA it is 50 percent. In Britain, the governor of the Bank of England openly announced a difficult two years, and in the United States, many members of the government and FOMC members continue to believe that the economy will only slow down a little, but there will be no recession.
It is worth noting that the latest GDP report was really strong, unlike the first two this year. The labor market continues to please the markets, as eloquently indicated by the reports of Nonfarm Payrolls, and unemployment has so far increased by only 0.2%. Thus, if both economies face a recession, then America is likely to be much weaker. Let me also remind you that on November 17, Jeremy Hunt must provide the government's financial plan for next year, from which it will become clear which taxes will be raised to avoid a budget deficit. I would say that the probability of a new downward trend segment starting soon is high.
The wave pattern of the pound/dollar instrument assumes the construction of a new downward trend segment, but it will probably start later. Now I advise buying the instrument on the MACD reversals "up" with targets located near the estimated mark of 1.1711, which equates to 161.8% Fibonacci. There is also a possibility that the upward section has been completed, and now we are seeing the construction of a corrective upward wave as part of a new downward section. Therefore, you need to be careful with purchases.
At the higher wave scale, the picture is very similar to the euro/dollar instrument, and this is good since both instruments should move similarly. At this time, the upward correction section of the trend is nearing completion. If this is indeed the case, then we will soon be building a new downward trend.