Regarding the pound/dollar pair, the wave analysis remains relatively clear yet complex. The construction of a new downtrend section continues, with the first wave taking on a quite extensive form. The second wave also turned out to be quite prolonged, giving us every reason to expect the prolonged development of the third wave.
At the moment, I am not entirely certain whether the construction of wave 2 or b is completed. The retreat of quotes from the reached peaks is too small to consider it a guaranteed start of wave 3 or c. Wave 2 or b has already taken on a five-wave form; however, it remains corrective and should conclude shortly (or may have already concluded). Nevertheless, we continue to observe the construction of new internal waves, which are currently challenging to attribute to any specific higher-scale wave.
Targets for the decline of the pair within the presumed wave 3 or c are situated below the 1.2039 mark, corresponding to the low of wave 1 or a. Unfortunately, wave analysis tends to become more complicated. At the moment, I do not discard the working scenario; a successful attempt to break the 38.2% Fibonacci level indicates the market's readiness for selling the British pound.
Sideways movement completed
The pound/dollar pair rate increased by 25 basis points on Tuesday. The retreat of quotes from the previously reached lows is currently very weak. The decline of the pair from the recent highs is also minimal. I cannot assert that the first internal wave within the future 3 or c is completed. Doubts persist regarding the current wave analysis. The pair has been in a sideways trend for a long time and only broke out of it yesterday. It is challenging to expect an immediate drop of the British pound to last year's low in the current circumstances, and the weaker the decline, the higher the probability of further complicating the entire wave analysis.
Today's news background was very weak, which can explain the low market activity throughout the day. Movements are usually stronger during the American session, so perhaps the most interesting events are yet to come. As of now, only the business activity index in the construction sector for January has been released, which, although slightly increased, remained below the key mark of 50.0. The market responded to this report with a 15 basis point decline. However, more important for the market at the moment is the information obtained from the Bank of England and the Federal Reserve. In brief, the Federal Reserve maintained a "hawkish" stance contrary to market expectations, while the Bank of England softened its "hawkish" stance as one of the board members already voted for a rate cut, and the regulator's statement no longer included the phrase about additional tightening of monetary policy. For me, this information suggests the possibility of a further decline in the British pound.
General conclusions
The wave pattern of the pound/dollar pair suggests a decline. Currently, I am considering selling the pair with targets below the 1.2039 mark because wave 2 or b cannot continue indefinitely, just like the sideways movement. A successful attempt to break the 1.2627 level signaled for sales, which I hope everyone managed to open. I will note that after a daily decline, the pair may rebound upward, but I do not expect anything from it other than further decline.
On a larger wave scale, the picture resembles the euro/dollar pair, but there are still some differences. The descending corrective section of the trend continues its construction, and its second wave has taken on an extended form – at 61.8% of the first wave. An unsuccessful attempt to break this level may lead to the beginning of constructing wave 3 or c.