FX.co ★ Wave analysis of GBP/USD for September 27. Fed: inflation is good, we just have to wait for Nonfarm Payrolls report

The wave counting for the GBP/USD currency pair still looks convincing, but it may soon require adjustments and additions. The exit of quotes from the reached lows gives hope for the completion of the construction of the internal corrective wave b as part of the future c. The current wave pattern is still not broken, so I advise you to stick to its current version. Moreover, the quotes could not fall below the minimum of the previous wave b. And this leaves the hope that from the current positions, the instrument will begin a new increase within the third wave in the composition of c with targets located around the 40th figure and above. A successful attempt to break through the low of two waves of b will lead to the need to make changes to the current wave pattern. However, let me remind you (this can be seen in the picture below) that the GBP/USD also continues to move with the help of corrective wave structures. In general, the instrument has been moving mainly horizontally in the last six months.

The exchange rate of the Pound/Dollar instrument increased by 40-50 basis points on Monday. Thus, the markets are buying the British pound again, which allows it to continue moving away from the lows reached last week. However, everything may change this week. Jerome Powell will give a speech twice, and the markets are clearly showing an increased interest in him now. Last week, the Fed hinted that it may begin to taper QE in November.

According to the Fed members, inflation has already reached the necessary values, which in the medium term will provide the target of 2%. But regarding the recovery of the labor market, not everything is so clear. The latest Nonfarm Payrolls report turned out to be quite weak, and many analysts believe that its weakness was the reason that the tapering of QE was not announced in September. Based on this, I conclude that the Fed will wait for the next Nonfarm Payrolls report and if it is strong, then on November 3, the start of unloading the Fed's balance sheet will be announced.

The labor market report will be released on October 8, so the Fed will have almost a whole month to make a final decision and analyze all the available data. And will the markets be waiting for Jerome Powell this week for his personal opinion on whether one Nonfarm Payrolls report can really decide the fate of the QE program in November? If the corresponding confirmations are received, this may support the dollar, and the Euro/Dollar instrument may rush down. Let me remind you that we do not need such a scenario. Therefore, I still expect that Powell will not make any new "hawkish" statements.

The wave pattern may change in the coming days, but it remains the same for now. I still expect the construction of an upward wave, but the wave counting may undergo changes. Thus, I advise buying the instrument based on an unsuccessful attempt to break the low of the previous wave b and hope to build a third wave as part of the future c, whose targets are located above the 40th figure. A protective order can be placed under the low of two waves b.

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 upward section of the trend can get an extended form, its first wave exceeded the peaks of waves b and d, and wave c (assumed) turns out to be very extended. The chances of a new strong increase in quotes remain quite high.