The wave analysis for the pound/dollar pair remains quite straightforward and clear. The construction of a new downtrend segment continues, and its first wave has taken on a fairly extended form. In my opinion, the British pound has no grounds for resuming an upward trend segment, so I do not even consider such a scenario. The assumed wave 1 or a is complete, although this conclusion is not as obvious for the British pound as it is for the euro. Wave 2 or b currently exhibits a three-wave pattern for the euro but not for the pound. Certainly, the corrective wave could be straightforward, but I still believe it should have at least three waves.
The internal wave structure of the first wave of the new trend segment looks complex, and it is difficult to identify five waves within it. However, five waves are visible for the euro. If the global wave has completed for the euro, there is an 80% probability it has done so for the pound as well. But regarding wave 2 or b, things are not as clear. I believe the correction could continue, despite today's decline.
The pound/dollar pair's exchange rate decreased by 40 basis points on Tuesday. This is not a significant drop and certainly does not indicate the completion of the corrective wave. However, the decrease from today's peak amounts to 80 points, not just 40. Furthermore, the day is not over yet, and sellers have gained momentum.
If the market had specific reasons to decrease demand for the euro today, the reasons to decrease demand for the pound would be less convincing. The unemployment rate in the UK dropped to 4.2% in August, and the number of unemployment benefit claims increased by 20,000, surpassing market expectations. The second report was undoubtedly weak, but we should consider the overall unemployment rate as well. Business activity indices are also not entirely clear. The manufacturing sector increased from 44.3 points to 45.2, while the service sector decreased from 49.3 to 49.2. The decrease was small, but the increase was noticeable. These news updates could not or should not have diminished the market's confidence in the British pound, which has been declining over the past three months.
Based on all that has been said, I believe it was the euro that pulled the British pound down, not the economic statistics from the UK. I have previously mentioned that these two currencies often move in the same direction and have a significant influence on each other. Today, we witnessed one such case. The same may happen on Thursday, when the results of the ECB meeting are revealed. Regardless of the outcome, we can expect a market reaction. Therefore, the British pound will not remain stagnant.
General Conclusions.The wave pattern for the pound/dollar pair suggests a decline within the downward trend segment. The maximum the British pound can expect in the near future is the construction of wave 2 or b. However, as we can see, there are significant problems even with a corrective wave at this point. I would not recommend new sales at the moment, but I also do not advise purchases because the corrective wave currently appears quite weak. In any case, this is a corrective wave.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are some differences. The downward corrective segment of the trend continues its construction, and its first wave has already taken on an extended form, clearly unrelated to the previous upward trend segment.