The wave analysis for the pound/dollar pair remains relatively clear and, at the same time, continues to become more complex. The construction of a new downtrend segment of the trend is ongoing, with the first wave of it taking on quite an extended form. The second wave has also become quite extensive, giving us every reason to expect a long construction of the third wave.
At the moment, I am not confident that the construction of wave 2 or b is complete. The retreat of quotes from the peaks needs to be bigger to consider it a guaranteed start of wave 3 or c. Wave 2 or b has already taken on a five-wave appearance, but it remains corrective and should be completed soon (or may have already been completed). Nevertheless, we continue to observe the construction of new internal waves that are currently very difficult to attribute to any specific higher-scale wave.
The targets for a decrease in the pair within the presumed wave 3 or c are located below the level of 1.2039, which corresponds to the low of wave 1 or a. Unfortunately, wave analysis tends to become more complex, and the news background only sometimes corresponds to it. I am not abandoning the working scenario at the moment, but a few unsuccessful attempts to break the 38.2% Fibonacci level indicate the market's unwillingness to sell right now.
The British pound continues its horizontal trading.
The pound-dollar exchange rate increased by ten basis points on Thursday. The news background today is very strong but also needs to be clarified. It should be noted that the ECB left interest rates unchanged, and just 15 minutes after that, two important reports were released in the United States. Preliminary estimates put the GDP in the fourth quarter at +3.3%. This is another victory for the US economy, as many economists expected a slowdown in the growth rate to 2-2.3%. However, the US economy has again demonstrated its strength in times of higher Federal Reserve interest rates. This is further evidence that demand for the US currency should continue to rise.
At the same time, another important report on durable goods orders was released. Without a doubt, this report turned out to be weaker than expected, showing an increase of 0% compared to the previous month's figure of +5.5% and the forecast of +1.1%. The durable goods orders report offsets the positive effect of the GDP report. This, paired with the results of the ECB meeting, which the market has yet to interpret, creates a situation where the euro may react and pull the British pound along with it. Today is a very eventful day, and it is better to wait until the market storm subsides. However, when writing this article, there is no storm in sight.
General conclusions.
The wave pattern of the pound/dollar pair suggests a decline. At the moment, I am considering selling the pair with targets below the level of 1.2039 because wave 2 or b should ultimately be completed and could end at any moment. However, since the movement has been horizontal for a month now, I would wait for a successful attempt to break the level of 1.2627 before believing in further pair declines.
The picture is similar to the euro/dollar pair on a larger wave scale, but there are still some differences. The descending corrective segment of the trend continues to take shape, with its second wave taking on an extended form – up to 61.8% of the first wave. An unsuccessful attempt to break this level could lead to the start of the construction of wave 3 or c.