The wave analysis for the pound/dollar pair remains quite straightforward and understandable. The construction of a new downward trend section is continuing, particularly its first wave, which is significantly time-consuming. In my opinion, there is no basis for the British currency to resume its upward movement, so I don't even consider the scenario of a new upward section. The first wave of the downward trend section has already taken on a very elongated form, but demand for the pound continues to decline. I would like to remind you that there are no specific target sizes for waves. The first wave can be constructed for an indefinite amount of time without any restrictions.
The internal wave structure of the first wave of the new trend section looks complex, and it is difficult to discern five waves within it. However, five waves are visible in the euro currency. If the construction of the downward wave set is completed for the euro, then, with an 80% probability, it will also be completed for the pound. At the moment, the pair has made an unsuccessful attempt to break the level of 1.2120, which corresponds to 76.4%, according to Fibonacci. The subsequent pullback from the reached lows may indicate the construction of a correction wave.
The pound/dollar currency pair increased by 60 basis points on Thursday. This is very little for the pound. The entire first downward wave currently covers 1000 points. Therefore, a 60-point pullback from the lows reached does not allow me to conclude that the construction of a corrective wave has begun. This wave has been looming for more than a week, and every unsuccessful attempt to break important levels for the euro or pound makes me look at the charts, hopefully. I believe that correction waves for the pound and euro will start simultaneously, so I am considering all levels on the way down for both pairs. Currently, such a level has been reached for the pound. This means that the construction of a correction wave may also begin for the euro.
Everything would be very good for the pound sterling if there were no regular news from the US that supports the demand for the dollar. Today, it became known that GDP in the second quarter grew by 2.1% year-on-year, which corresponds to market expectations. In the previous quarter, growth was 2.2%, and two quarters ago, it was 2.6%, and even earlier, 2.7%. As we can see, there are no problems in the US economy associated with the sharp rise in interest rates over the past year and a half. Unemployment remains at low levels, GDP is high, and the labor market, while weakening, is still strong.
All of this supports long-term demand for the US currency. I would like to remind you that for about a year, the market kept demand for the dollar at a low level, but now the situation is changing, and only the first wave of the new downward trend section allows us to assume that the strengthening of the US currency may be strong and lasting. The Bank of England and the ECB are currently unable to support their currencies as they prepare to end their tightening policies.
The wave pattern for the pound/dollar pair suggests a decline within the new downward trend section. The maximum the pound can expect in the near future is the construction of wave 2 or b. However, even with a corrective wave, significant problems arise. At this time, I would remain cautious about selling, as the unsuccessful attempt to break the level of 1.2120 warns of the possibility of transitioning to the construction of a corrective wave.
On the larger wave scale, the picture resembles the euro/dollar pair, but there are still some differences. The downward correction section of the trend continues its construction, and its first wave has already taken on an elongated form and is definitely not related to the previous upward trend section.