FX.co ★ Analysis of GBP/USD for November 17; Two factors to support demand for the pound

Wave pattern

The wave counting for the Pound/Dollar instrument continues to look quite complicated due to deep corrective waves as part of the downward trend section, but at the same time, it is quite convincing.

Inside the last wave C, presumably five internal waves are visible, and each subsequent one is approximately equal in size to the previous one. However, since all waves in the composition of C or A are almost equal in size, even a minimal approach below the low of wave c in C may already mean that wave e is nearing its completion. Thus, it may not even be able to fall to the 61.8% Fibonacci level.

Therefore, we need to be ready to complete not only e but also the entire wave C. So far, I am not considering the option of complicating the proposed wave C. The internal wave counting of the wave e in C does not look clear and, therefore, can take any form of complexity.

The exit of quotes from the reached lows may already mean the end of wave e, and a successful attempt to break through the 50.0% Fibonacci level may indicate the readiness of the markets to buy the instrument.

The pound is in restrained demand in the market.

The exchange rate of the Pound/Dollar instrument increased by 70-80 basis points on Wednesday. Thus, the markets still find reasons to buy the pound sterling. It was easier to find them today than yesterday. The news background today was expressed by the only report on inflation in the UK, but this report was enough for the instrument to increase both in the morning and in the afternoon.

The consumer price index rose to 4.2% YoY in October. In recent months, any strong increase in inflation inevitably causes the strengthening of the national currency. Therefore, it was logical for us to see an increase in demand for the pound today.

This increase really brings the instrument closer to building a new upward trend segment, but still, the support of the news background will be needed to continue the growth of the sterling. And from my point of view, two factors can help this.

First, the Bank of England surprised many at the last meeting, as two members of the committee voted for an interest rate increase at once. Thus, the rate may be raised in December or January, which no one expected a month ago.

Secondly, the wave counting, which now indicates a high probability of completing the construction of a downward trend section. Wave C in C may become even more complicated and build a pair of internal waves down, but still, its current structure looks quite complete. Now we need a successful attempt to break the 1.3460 mark, which will make life much easier for buyers.

General conclusions

The wave pattern of the Pound/Dollar instrument looks quite convincing now. The expected wave e may be nearing its completion or has already been completed, and the MACD indicator has formed an "up" signal. Therefore, if the attempt to break through the 1.3460 mark remains unsuccessful, then the next "down" signal can still be considered for sales with targets located near the 1.3270 level, which equates to 61.8% Fibonacci level. A successful attempt to break through the 50.0% Fibonacci level will indicate the readiness of the markets to build a new upward trend.

Starting from January 6, the construction of a new downward trend section began, which can turn out to be almost any size and any length. At this time, the proposed wave C may be nearing its completion, but there is no confirmation of this yet. The entire downward section of the trend may lengthen, but there are no signals about this yet either.