The wave analysis for the pound/dollar pair remains relatively simple and clear. The construction of the ascending wave 3 or c is completed, and the building of a presumed new descending trend section has begun, which theoretically could still be wave d. Still, the probability of that is close to zero. There are no reasons for the British currency to resume its ascent. However, wave pattern has transformed into a more complex one, and wave 3 or c has taken on a more extended form than many analysts expected several months ago. The ascending trend section may still take on a five-wave form if the market finds new reasons for long-term purchases.
The internal wave structure of the first wave of the new trend section looks complicated, much more so than for the euro/dollar. Nevertheless, market sentiment is fairly clear. Although the British pound resists the decline more, there are not many reasons for it to rise either. The latest important data from the United States was disappointing, but it has not pleased the markets in Britain for a long time either. The pair will continue to decline following the Euro currency.
Is the Bank of England waiting or acting?
The pound/dollar pair rose by 45 basis points on Monday. The news background did not impact the pound's increase today because there was none. While there are planned speeches by members of the ECB Governing Council in the European Union, nothing in the UK or the US could interest the markets. Therefore, today, we observed a standard corrective wave, barely noticeable on the charts. Therefore, I expect further declines in the Pound quotes within the framework of the new descending trend section.
Yesterday, on Sunday, the Chancellor of the Exchequer of the United Kingdom, Jeremy Hunt, announced that the government expects inflation to fall to 5% this year, which is twice as low as what Bank of England Governor Andrew Bailey previously stated. However, it remains to be seen for currency traders whether the Bank of England intends to wait for this level or plans to continue tightening its monetary policy to achieve this level at any cost. There is a fundamental difference between these two scenarios. The pound can continue to decline in the first case, while it can expect a new rise in the second case.
The Bank of England remains a regulator whose plans are difficult to predict. Several months ago, it unexpectedly raised the interest rate by 50 basis points when almost no one expected it. Over the last 12-18 months, no central bank has decided that the market did not expect even once. Therefore, predicting the future actions of the British regulator is very challenging.
The wave pattern of the pound/dollar pair suggests a decline within the framework of a downward trend section. There is a risk of completing the current downward wave if it is wave d, not 1. In this case, the construction of wave 5 may begin from the current levels. However, we are currently observing the construction of the first wave of a new section. At most, one can expect the construction of wave 2 or b. I still recommend selling with targets around the level of 1.2442, which corresponds to 100.0% on the Fibonacci scale.
The picture is similar to the euro/dollar pair on a larger wave scale, but there are still some differences. The descending corrective trend section is completed, and the construction of a new ascending trend section continues, which may already be completed or take on a full five-wave form.