Monday started with the release of PMIs in Europe, America, and Britain. PMIs in the manufacturing sector showed negative dynamics, which disappointed both buyers and sellers of both instruments. In addition to these reports, there was another speech by a member of the European Central Bank's Governing Council. Joachim Nagel, the head of the German central bank, reported that signals from monetary policy point to its further tightening. He also mentioned that the ECB has a long way to go to reach price stability.
However, Nagel spoke and hinted not only at the European Union's interest rates. He also paid attention to the QT program (quantitative tightening), which involves selling Treasury bond obligations off the ECB's balance sheets. Nagel reported that the ECB should significantly reduce the balance, which "inflated" during the coronavirus pandemic. With everything said, we can conclude that the ECB policy clearly points in the direction of further tightening, and that the central bank plans to use any measure and tools to reduce inflation.
In my opinion, the market is already tired of these comments. In the past few weeks, we have heard at least 15 presentations, examined 15 points of view, most of which boil down to the same thing. Market participants fully realize that the ECB will continue to raise rates, but we don't know to what level it plans to reach. Although, the Bank of England did show how it plans to act so we can't accuse the Bank of lacking ambition. The ECB is unlikely to raise the rate by 50 basis points at the next meetings, and standard steps of 25 points are likely already taken into account. The July increase is certainly already accounted for.
This week I do not expect a sharp decrease or increase in the instruments. In my opinion, we can expect active trading on Friday, which is when the US is set to release its payrolls and unemployment data. But these reports do not guarantee strong market movements either, as their values may coincide with market expectations. I believe that both instruments will gradually move down.
Based on the analysis conducted, I conclude that the downtrend is currently being built. The instrument has enough room to fall. I believe that targets around 1.0500-1.0600 are quite realistic. I advise selling the instrument on "down" signals from the MACD indicator. The presumed wave b is apparently over. According to the alternative markup, the ascending wave will be longer and more complicated, but I am not sure if it will take a more complicated form. I don't think the news background is currently more supportive of the euro.
The wave pattern of the GBP/USD instrument has changed and now it suggests the formation of an upward wave, which can end at any moment (or it is already completed). Earlier, I advised buying the instrument in case of a failed attempt to break through the 1.2615 mark, which is equivalent to 127.2% Fibonacci. Then wave 3 or c can take a more extended form, and the instrument will return to the 1.2842 mark. I believe it would be better to sell, and I advised it two weeks ago, setting a Stop Loss above the 1.2842 mark, but the signal from 1.2615 temporarily canceled this scenario. However, it is still possible to stay in short positions, moving the Stop Loss to zero.