The year 2023, which followed the previous years' trend, turned out to be very complex and tense, is coming to an end. We would like to wish everyone a better year ahead, but honestly, there are few prerequisites for that. Next year will see elections in the United States, and the American economy is predicted to face, at the very least, a recession, and at the most, a new financial crisis that could affect the entire world, as the U.S. economy is closely linked to practically every country in the world. A change in the political system in America also bodes nothing good. If Donald Trump and the Republicans come to power, it will signify a shift in the direction of the U.S., which means there will be changes. And changes are always bad for the markets.
The prospects for the dollar remain uncertain. Despite the fact that the Federal Reserve rate remains at its peak, and the economy is growing by 5% per quarter, demand for the U.S. currency in 2023 has more often decreased than increased. Although over the whole year, the U.S. currency depreciated against the euro by only 3 figures and against the pound by 6. The dollar's losses are not critical, but these are losses in the face of high GDP growth rates and a high Fed rate. What will happen next year when the Fed begins to ease monetary policy and GDP starts to decline? The market is paying more attention to the state of the U.S. economy right now and assumes its conditions. If we can currently describe this condition as excellent, then what will happen next year when it begins to deteriorate?
Economic deteriorations will occur in the European Union and the United Kingdom. It is doubtful that anyone seriously takes the idea that the European and British economies will manage to evade a recession. The recession is unlikely to be severe, as the European Central Bank and the Bank of England also intend to start a policy of easing, but markets are focusing on America. Based on all the above, considering the trends of 2023, I would assume that the dollar will continue to depreciate in 2024.
This does not mean that it will depreciate throughout the year, and we will not see any upward wave. I still expect an impulsive downward wave on both instruments, but once it ends, a new upward trend segment may emerge, with targets above 1.12 for the euro and 1.31 for the pound. At the moment this scenario is working for me.
Based on the analysis, I conclude that a bearish wave pattern is still being formed. The pair has reached the targets around the 1.0463 mark, and the fact that the pair has yet to surpass this level indicates that the market is ready to build a corrective wave. Wave 2 or b has taken on a completed form, so in the near future, I expect an impulsive descending wave 3 or c to form with a significant decline in the instrument. I still expect the pair to fall with targets below the low of wave 1 or a. An unsuccessful attempt to break the 38.2% level may indicate that the market is prepared to sell.
The wave pattern for the GBP/USD pair suggests a decline within the descending wave 3 or c. At this time, I can recommend selling the instrument with targets below the 1.2039 mark because wave 2 or b should end, and it could do so at any moment. The longer it takes, the stronger the fall. The peak of the assumed wave e in 2 or b can be used for short positions, and an order limiting potential losses on transactions can be placed above it.