FX.co ★ Wave analysis of GBP/USD for September 9. UK: rise in taxes does not worry markets

The wave counting for the GBP/USD pair still looks quite convincing and does not require any additions and adjustments at the moment. The assumed waves a, b, and c of the assumed upward trend segment are quite long, but the wave counting itself does not cause any doubts. An unsuccessful attempt to break through the 1.3873 mark, which is equal to 23.6% Fibonacci level, led to the exit of quotes from the reached highs, but wave c does not yet look fully completed. Thus, I expect the resumption of the construction of this wave and the increase in the quotes of the currency pair. A successful attempt to break through the 23.6% Fibonacci level will indicate the readiness of the markets for new purchases, which is necessary for the pair at this time. The targets of wave c can be located between the peaks of wave a and the level of 1.4239. But whatever it was, it still implies the continued growth of the British pound. I don't see any reasons to make any changes to the current wave pattern yet.

The GBP/USD pair rose by 70 basis points on Thursday, despite the absence of news background. There was no interesting news in America either, and the EUR/USD pair (which just has great reasons to move!) confirms this since it has been trading with a minimum amplitude for the entire first half of the day. Nevertheless, the markets still found reasons to increase demand for the British pound. From the news of the last two days, I can only note the speech of the Governor of the Bank of England, Andrew Bailey, who said that the minimum conditions for tightening monetary policy have been reached, as well as the news about raising taxes in the UK to a level that will be the highest in the history of the country.

It is noteworthy that if taxes are indeed raised (payroll tax is expected to increase by 1.25%, dividend tax by 1.25%), this will mean that Boris Johnson will violate the manifesto of the Conservative Party in 2019, which contains a promise not to raise taxes. However, the UK government believes that after the coronavirus pandemic, the country needs additional funds to invest in social protection and healthcare. According to experts, additional taxes will bring about £10 billion to the budget. However, this news can hardly be called positive for the British pound. As well as the statement of Andrew Bailey, who did not name any specific dates when the programs of assistance to the economy may begin to be curtailed. Everything is still "in the fog", and there are no specifics. Thus, I am inclined to believe that the increase in the quotes of the British pound is largely due to the wave counting and the need to finish building the wave c.

The wave pattern is now more or less clear. I still expect to build an upward wave, so at this time I suggest considering buying the pair for each MACD signal "up" with targets located near the 1.4000 mark (the first target). The GBP/USD currency pair presumably completed the construction of an internal corrective wave consisting of c.

The upward section of the trend, which began its construction a couple of months ago, has taken a rather ambiguous form and has already been completed. A new section of the trend can get an impulse form, its first wave has acquired a sufficiently extended form and exceeded the peaks of waves b and d. The chances of a new strong increase in quotes are growing. If the news background does not interfere, then the increase in quotes should continue in the near future.