Regarding the pound/dollar pair, the wave analysis remains quite clear and, at the same time, complex. The construction of a new downtrend continues, the first wave of which has taken on a very extensive form. The second wave has also turned out to be quite extensive, giving us every reason to expect the prolonged construction of the third wave.
The construction of wave 2 or b still needs to be completed. The retreat of quotes from the peaks reached 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 end soon (or has already ended). Nevertheless, we continue to observe the construction of new internal waves, which are currently very difficult to attribute to any specific wave of a larger scale.
Targets for the pair's decline within the presumed wave 3 or c are located below the level of 1.2039, corresponding to the low of wave 1 or a. Unfortunately, wave analysis tends to be complicated and does not correspond to the news background. At the moment, I do not abandon the working scenario; a successful attempt to break through the 38.2% Fibonacci level indicates the market's readiness to sell the British pound.
Bulls rallied on American reports.
The pound/dollar pair's rate decreased by ten basis points on Friday. An increase in quotes in the first half of the day would have been more logical, as another important report was released in the UK. This time, it was on retail trade volumes. Retail sales for January increased by 3.4%, although the market expected an increase of only 1.5% every month. Retail trade, excluding fuel sales, increased by 3.2%, twice as high as the market's expectations. However, the values for the previous month (December) were revised from low to lower. According to updated data, retail sales fell by 3.3% in December, and retail sales excluding fuel fell by 3.5%. The January values were much better than market forecasts and should have triggered increased demand for the British pound, but the market decided otherwise today.
Today, we will see a few more reports from the US, but this week, neither the dollar nor the pound strengthened their market positions. Hence, its conclusion is likely to maintain the current balance of power significantly. Reports on inflation in the US and the UK unequivocally supported the dollar. Also, in its favor, the UK's GDP report was played. However, retail sales in Britain and the unemployment rate turned out to be better than market expectations, and yesterday, in the US, three reports immediately showed values that were too weak.
General conclusions.
The wave picture of the pound/dollar pair still suggests a decline. At the moment, I am considering selling the pair with targets located below the level of 1.2039 because wave 2 or b cannot last forever, just like the sideways movement. A successful attempt to break through the level of 1.2627 became a signal for sales. This week, another signal was formed in the form of an unsuccessful attempt to break through this level from below. Now, I have some confidence in the pair's decline to at least 1.2468, which will already be a huge achievement for the dollar, but demand remains low despite everything.
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 its construction, and its second wave has taken on an extensive form—up to 61.8% of the first wave. An unsuccessful attempt to break through this level may lead to the start of the construction of wave 3 or c.