In the euro analysis, I already pointed out that the European Central Bank decided to raise interest rates by 25 basis points on Thursday. For some, this may have come as a surprise, but it's worth noting that no one completely ruled out the possibility of further tightening of monetary policy in September. There was just a likelihood that the central bank might pause. Several members of the Governing Council began discussing the possibility of a pause two months ago, which sparked a lot of speculation about the end of tightening. However, as we learned, those policymakers who supported a rate hike remained in the minority during the vote. ECP President Christine Lagarde announced this during the press conference.
This means that the number of hawks within the ECB is still small, but it's evident that it will likely increase over time. However, what's more important for the eurozone and its prospects is another significant point. Despite the fact that the decision to raise interest rates was nearly unanimous and is, in itself, a hawkish decision, demand for the euro decreased. I believe this can only be related to the fact that the market has already priced in the entire tightening cycle. Therefore, it no longer matters where inflation stands, how many officials voted in favor of tightening, or how long interest rates will continue to rise. Based on this, I think that wave analysis is more important than the news background right now.
Next week, the Federal Reserve's meeting will also likely be a very important event. If we assume that the ECB provided a surprise, the same could happen next week. The Fed should pause in September, as it has slowed the pace of tightening to 0.25% over two meetings, but inflation has risen in July and August, which could lead to an interest rate hike in September. This would be a surprise. At the same time, core inflation in the United States continues to decrease and should slightly ease concerns at the Fed. In the coming months, I believe that demand for both the euro and the pound will continue to decline. Both currencies can only count on a corrective wave within the new downtrend.
Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite feasible. Therefore, I will continue to sell the instrument with targets located near the levels of 1.0636 and 1.0483. A successful attempt to break through the 1.0636 level, which corresponds to the 100.0% Fibonacci level, would indicate a possible end of the first wave, which has taken on an extended form.
The wave pattern of the GBP/USD pair suggests a decline within the downtrend. There is a risk of completing the current downward wave if it is d, and not wave 1. In this case, the construction of wave 5 might start from the current marks. But in my opinion, we are currently witnessing the first wave of a new segment. Therefore, the most that we can expect from this is the construction of wave "2" or "b". An unsuccessful attempt to break the 1.2444 level, corresponding to 100.0% on the Fibonacci scale, may indicate the market's readiness to extend the decline.