The wave analysis for the GBP/USD pair remains relatively straightforward and clear. The construction of upward wave 3 is complete, and a new descending trend section, possibly wave 4, is forming. There are no solid reasons for the pound to continue rising (supported by various reports and events). However, the wave pattern has become more complex, and wave 3 has extended more than anticipated by many analysts a few weeks ago. The entire upward trend could be a five-wave pattern if the market finds new reasons to support long-term purchases.
The wave analysis for the pound now appears simpler and more convincing compared to the euro's. In any case, I anticipate the development of a descending wave, which has begun on schedule. Even if this is the fourth wave within the upward wave set, it should be extensive or prominently three-wave. I do not expect the decline in quotes to end, and any upward correction may have already concluded.
Interestingly, the pound reacted to the ECB meeting more favorably than the euro.
On Thursday, the GBP/USD pair declined by ten basis points, but it gained 40 points the previous day. Overall, the amplitude in recent days has been insignificant. Yesterday evening, we witnessed only one strong candle, and today we saw another. Demand for the British currency decreased following the euro, despite the ECB raising interest rates by 25 basis points as anticipated by the markets. This led to a decline in the dollar due to tightening monetary policy in the US and a decline in both the euro and pound due to tightening in the Eurozone. This indicates that the market had already priced in both rate hikes beforehand. Considering the current wave analysis, the decrease in demand for the pound is likely to continue.
Looking ahead, next week will see a meeting of the Bank of England, and the interest rate will increase for the fourteenth consecutive time. Assuming the increase is 25 basis points, it is safe to say that the market has already accounted for it. Consequently, I see no obstacles to further decline in the pair.
Furthermore, the US GDP report for the second quarter was released today. The US economy's growth stood at 2.4% q/q, surpassing the market's expectations of no more than 1.8%. Additionally, durable goods orders increased by 4.7% in June, whereas the market expected +1%. Both American reports significantly exceeded expectations, and they were the cause of the decline in both pairs and the rise in demand for the dollar. Nevertheless, this movement aligns perfectly with the current wave pattern. We now await Christine Lagarde's speech, hoping she won't announce 4-5 more rate hikes in the future.
In conclusion, the wave pattern for the GBP/USD pair suggests a decline in the upcoming weeks. With the successful breakthrough of the 1.3084 level (top-down), readers could have taken sell positions, as I previously advised. While the 1.2840 level was not surpassed, the upward corrective wave may have already concluded. Thus, I anticipate a resumption of the decline. The current wave has descended below the peak of wave 3 in 5, indicating the construction of a descending trend section. As a result, selling positions can be taken based on MACD signals "down" or any other reversal signals pointing downward.
The pattern is reminiscent of the EUR/USD pair on a larger wave scale, but some distinctions exist. The descending corrective trend section appears complete while the construction of a new upward one continues, which may already be finished or take on the form of a full-fledged five-wave pattern.