FX.co ★ Analysis of GBP/USD on September 5. The Conservative Party of Great Britain has elected Liz Truss as the new leader

For the pound/dollar instrument, the wave marking at the moment looks quite complicated but does not require any clarification. The upward wave, which was built between May 13 and May 27, does not fit into the overall wave picture, but it can still be considered corrective as part of the downward trend section. Thus, it can now be concluded that the downward section of the trend takes a longer and more complex form. At the moment, we have completed waves a, b, c, and d, so we can assume that the instrument continues to build wave e. If this assumption is correct, then the decline in quotes may continue in the near future. However, I remind you that if impulse structures can become more complicated and lengthened, then corrective ones can become even more so. Given the news background and the fact that the Fed is not going to stop raising interest rates now, the entire downward trend section may take a much longer form. A successful attempt to break through the 1.1708 mark, which corresponds to 161.8% by Fibonacci, indicates that the market is ready for new sales of the British. At the same time, the low of wave e is already much lower than the low of wave c, so wave e can end at any time.

Liz Truss takes office as Prime Minister in difficult times

The exchange rate of the pound/dollar instrument increased by 10 basis points on September 5 but managed to update its lows for 2 years once again. The demand for the British pound is declining steadily, almost every day. Today, the background was expressed by the indices of business activity in the UK for August. The service sector and composite indices turned out to be worse than market expectations, but the market itself did not pay attention to them, since now there is much more significant news.

Elizabeth Truss became the new leader of the Conservative Party and Prime Minister. 81 thousand party members voted for her, and only 60 thousand voted for Sunak. Thus, the victory of the Truss is more than convincing. However, the ex-head of the Ministry of Foreign Affairs will have a very difficult time in his new post. She is taking over from Boris Johnson at the most difficult time for Britain when the country is on the verge of a severe recession, and the cost of living is rising almost every month. Inflation is off the scale and, according to many analysts, it will significantly exceed even the most pessimistic forecasts given by the Bank of England. Let me remind you that the regulator expects a peak value of about 13-15%. Some analysts and agencies are already talking about 20% inflation in 2023. Truss has promised to reduce VAT, but even such a measure will not fully compensate British households for rising electricity and heating bills. Prices have increased several times and may continue to increase. What decisions Truss will make depends on how long she will be at her post. Let me remind you that Boris Johnson and Theresa May left the post of Prime Minister ahead of schedule.

General conclusions

The wave pattern of the pound/dollar instrument suggests a continued decline in demand for the pound. I advise now selling the instrument with targets located near the estimated mark of 1.1112, which is equivalent to 200.0% Fibonacci, for each MACD signal "down", but this mark is quite far away, so the instrument may not reach it. Inside the fifth wave, it is necessary to sell more cautiously, since the downward section of the trend can end at any moment.

At the higher wave scale, the picture is very similar to the euro/dollar instrument. The same ascending wave that does not fit the current wave pattern, the same three waves down after it. Thus, one thing is unambiguous – the downward section of the trend continues its construction and can turn out to be almost any length.