The wave analysis of the pound/dollar pair has changed its appearance to a simpler and more understandable. Instead of a complex correction segment of the trend, we can see an impulsive ascending or a simpler correction. At this time, the formation of the ascending wave 3 or c continues, and the pound has a great opportunity to grow up to the 30th figure. Whether this is justified by the current news background is up to you. In my opinion, the pound has no reason to continue to rise to the 30 or 35 figure (which is quite possible if we are talking about an impulsive or at least simply five-wave segment of the trend), and the assumed wave 3 or c may already be completed. However, wave analysis can always transform into something more complex. An unsuccessful attempt to break through the 127.2% Fibonacci level indirectly indicates the market's readiness for new purchases.
A descending wave set is expected for the euro, but still, the wave analysis can transform into a similar one with the pound, and then everything will fall into place. Inside wave 3 or c there could be a five-wave structure (or a wedge-like a-b-c-d-e structure could be formed), which implies at least one more wave up.
The market did not believe in the strength of the American labor market
The pound/dollar pair rate increased by 80 basis points before the release of American statistics on Thursday. In the first half of the day, the markets could only pay attention to the British business activity index in the construction sector, which turned out to be weaker than expected. The pound's growth could only be associated with negative expectations regarding American labor market reports and the ISM index. In the previous review, I analyzed the ISM index, now let's talk about the other reports.
The number of initial claims for unemployment benefits was 253 thousand with market expectations of 256 thousand. The report's value is neutral and could not provoke a market reaction. The number of job openings as of May was 9.8 million with market expectations of 9.935 million. Therefore, this report turned out to be worse than forecasts and could not cause an increase in demand for the dollar. But the ADP report, which is very often in the shadow of Nonfarm Payrolls, unexpectedly for many showed +497 thousand new jobs, although expectations did not exceed 228 thousand.
However, it should be noted that the ADP report is indeed perceived by the market as secondary after Nonfarm Payrolls. A strong ADP value often did not cause any market reaction, as it preferred to wait for payrolls. But today, the ADP turned out to be very strong and, together with the ISM index, caused a strong increase in demand for the US currency in the second half of the day. And the market, which was getting rid of the dollar in the first half of the day, turned out to be wrong in its assessments and expectations.
The wave pattern of the pound/dollar pair has changed and suggests the formation of an ascending wave set. Previously, I advised buying the pair in case of an unsuccessful attempt to break through the 1.2615 mark, equivalent to 127.2% Fibonacci. Wave 3 or c can take a more extended form, or a wave e in the wedge will be constructed, and the pair will return to the 1.2842 mark at least. Sales now look more promising, and I advised them two weeks ago with a Stop Loss set above the 1.2842 mark, but the signal from 1.2615 temporarily canceled this scenario. New signals are needed for sales.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are also some differences. The downward correction segment of the trend is completed, and the formation of a new ascending one continues, which can already be completed, or it can take a full five-wave form. And even if it takes a three-wave form, the third wave can be extended or shortened.