The wave analysis for the pound/dollar pair maintains a relatively simple and clear structure. The construction of an upward Wave 3 or C is underway, with the pound reaching the 31 level. There are no valid reasons for the pound to continue its upward movement, supported by numerous reports and events. The presumed Wave 3 or C is approaching completion or may have already concluded. However, the wave pattern has become more complex, and Wave 3 or C has taken on a more extended form than anticipated by many analysts a few weeks ago. Within it, five waves are clearly visible, suggesting that this wave might already be finished.
Compared to the euro, the pattern for the pound appears much simpler and easier to understand. The third wave could be the concluding wave in an upward wave set or the third wave within a five-wave structure. Consequently, I anticipate the formation of a downward wave in either case. Although the news background could illuminate this matter, the current market must pay more attention. The successful attempt to break above the 1.3086 level, corresponding to the 200.0% Fibonacci, indicates the market's readiness for minor selling if the price closes below it.
The market is not rushing into making decisions
The exchange rate of the pound/dollar pair remained unchanged on Tuesday, and both pairs have remained practically stagnant for nearly three full days. This consolidation occurs at the peak of the ascending trend segment rather than after consolidation or correction following a significant pair's growth. This indirectly suggests that the segment still needs to be completed.
Today, only two reports from the United States could have influenced market sentiment. As previously mentioned, both reports turned out to be weak. However, in the past few hours, there has been a slight increase in demand for the US currency if we consider a 50-point rise as "growth." At this point, I cannot confidently state whether the ascending Wave 5 in Wave 3 or C is completed.
Nevertheless, we can only expect its completion given the current circumstances. When there is a clear five-wave structure, it can assume a more extended form. In such cases, any wave structure can become more complex. I prefer to rely on simpler wave formations as they are easier to analyze.
The market awaits tomorrow's inflation report in the UK, which could awaken it from its three-day slumber. Regardless of the report's outcome, we can only anticipate a decline in the pound based on logical reasoning. The pound has appreciated significantly in recent weeks, already factoring in all the positive factors for the next month. However, reality may once again disappoint.
In summary, the wave pattern of the pound/dollar pair suggests the formation of an upward wave set. However, the wave structure has already taken on a five-wave form, indicating the possibility of its completion. Since the successful attempt to break above the 1.3084 level (top-down), we can expect a minor decline in the instrument. Three downward waves should be constructed based on the wave analysis, leading the pair toward the 1.2840 level. I recommend cautious selling.
On a larger wave scale, the overall picture resembles the euro/dollar pair, albeit with some differences. The downward corrective trend segment has concluded, and a new upward trend is underway, which may already be completed or form a complete five-wave pattern. Even if it takes the form of a three-wave structure, the third wave may be either extended or truncated.