The wave analysis for the GBP/USD pair remains quite complex, but it may become clearer in the coming weeks. A successful attempt to break the Fibonacci level of 50.0% indicates the market's readiness to form a downward wave 3 or C. If this wave indeed continues to develop, the wave pattern will become much simpler, and the threat of complicating the wave analysis will disappear.
As I have already noted, the wave pattern should be simple and understandable to work with. There has been little simplicity and clarity in recent months. For a long time, the pair was in a sideways trend and only now has real chances to form an impulsive downward wave.
In the current situation, my readers can expect the formation of wave 3 or C, the targets of which are below the low of wave 1 or A. Therefore, the pound should decline by another minimum of 300-400 basis points. With such a decline, wave 3 or C will be relatively small; I expect a much larger decline in quotes. The news background supports the US currency, and after breaking through the level of 1.2469 (50.0% Fibonacci), the psychological barrier for sellers has been lifted.
Sellers are quick to get back into the market.
The GBP/USD pair remained unchanged throughout Friday. Today in America, several reports were released that could have interested my readers, but their values practically all coincided with the market's expectations. Therefore, it wasn't easy to expect a strong reaction. Yesterday was much more interesting in this regard. The US GDP report for the first quarter showed that the economy grew by 1.6% quarterly and by 3.1% annually. It seems that the market first looked at the second value and only then realized how weak the first one was. The quarterly growth of the US economy turned out to be significantly lower than expected, which ultimately caused a decline in demand for the US currency. I do not believe that the GDP report will change the market sentiment, but yesterday, it significantly spoiled the dollar's prospects. If the US economy continues to slow down at such a pace, it will soon catch up with the British one.
The GBP/USD pair currently maintains prospects for forming a downward wave 3 or C. This week, we saw a strong increase in the pound. However, more is needed to consider the current wave analysis irrelevant. If the decline resumes in the near future, the third wave will continue to form, and there will be no questions left. The news background remains more optimistic for the American currency than for the British one. The key factor is the fact of the second or third postponement of the first round of monetary policy easing by the Fed.
General Conclusions
The wave pattern of the GBP/USD pair still suggests a decline. At the moment, I am still considering selling the instrument with targets below the level of 1.2039, as wave 3 or C is beginning its formation. The successful attempt to break through the level of 1.2472, which corresponds to 50.0% Fibonacci, indicates the long-awaited readiness of the market to form a downward wave.
On a larger wave scale, the wave pattern is even more eloquent. The downward correctional segment of the trend continues to form, and its second wave has acquired an extended form - at 76.4% of the first wave. An unsuccessful attempt to break through this level could have led to the beginning of the formation of wave 3 or C.
The main principles of my analysis:
Wave structures should be simple and understandable. Complex structures are difficult to play, and they often entail changes.If there is confidence in what is happening in the market, it is better to avoid entering it.There is never one hundred percent certainty about the direction of movement. Remember protective Stop Loss orders.Wave analysis can be combined with other types of analysis and trading strategies.