FX.co ★ Analysis of GBP/USD on December 13. Paris may launch legal proceedings against UK.

Wave analysis

According to the analysis of the pound/dollar pair, the last wave in C may soon end its formation. A decline in the British pound logged in the last several days points to the fact that wave e in C could become longer than I expected earlier. However, it should have stopped its formation long ago. Unfortunately, the news flow will hardly support the pound sterling. In addition, it is difficult to predict how it may change after the Bank of England and the Fed announce their decision later this week. The pair's rise from the lows could be explained by the completion of wave e in C. However, the increase is really insignificant to make conclusions. Meanwhile, the euro/dollar pair may form another downward wave. Thus, wave e may continue its formation. It will be really good if both instruments end the formation of their downward parts simultaneously.

Paris is dissatisfied with the actions of the British government and may launch legal proceedings against the UK.

On Monday, the pound/dollar pair dropped by 50 pips and then recouped almost all its losses. The pair failed to break 1.3271 that is the 61.8% Fibonacci level. Thus, there are doubts about the market readiness to start buying the British pound. The situation is likely to clear up on Thursday. Paris was waiting for several weeks for concessions on the fish issue from London, but did not win them. The UK is also reluctant and selectively issues licenses to fish in its waters to French fishing vessels, which does not suit either the vessels themselves or the French capital. Secretary of State for Europe Clement Beaune said that France had warned the UK of its readiness to launch legal proceedings for non-compliance with the Brexit agreement if it did not change its position regarding French fishermen. Clement Beaune also said that Paris did not want to launch this procedure, but would be forced to apply to the European Commission with this request. The fact is that all Europeans believe that the UK does not fulfill its obligations. Thus, relations between Paris and London are only heating up. The leaders of these countries stick to their principles and do not show desire to resolve the current situation peacefully. Against this background, the British pound may continue losing value.

Conclusion

Wave e may end its formation, but there are still some doubts. I recommend that traders wait for a successful break of 1.3271 that is a 61.8% Fibonacci level. After that, they may start buying the instrument.

Bigger time frame

Since January 6, the downward section of the trend has been forming. It could be of any length. At the moment, wave C may end its formation, but there are no proofs. The downward section may become significantly longer.