FX.co ★ GBP/USD. Analysis for February 23, 2023

The wave pattern for the pound/dollar pair now appears to be challenging, but it does not call for any clarifications. The wave patterns for the euro and the pound differ somewhat, but both point to a decrease. Our five-wave upward trend section has the pattern a-b-c-d-e and is most likely already finished. I predict that the downward section of the trend has begun and will continue to develop, taking at least a three-wave form. Wave B appeared to be unnecessarily long, but it did not cancel. So, it is now anticipated that a wave has started to form with a downward trend section, the targets of which are situated below wave a's low. In other words, at least 100–200 points less than the current rate. Although it's too soon to speculate, I believe wave c may end up being deeper and that the entire downward section of the trend may potentially adopt a five-wave pattern. It took a long time for the instrument to start moving quotes away from the peaks reached, although it had been on the verge of restarting the development of an upward trend segment. Because wave c hasn't finished yet, the low of assumed wave a hasn't been broken.

On Thursday, the pound/dollar exchange rate increased by 10 to 20 basis points. The news backdrop has again stopped the British pound's decline. Today, there was only one noteworthy report for the pound/dollar pair, which I initially overlooked. There are three estimates for the quarter's GDP figures. As the market receives the initial approximation of value, the first estimate is therefore the most intriguing. The second assessment corrects the first and is intermediate. The third one, which concludes the series, is the last. The second, and hence the least significant, was released today. The market's response was muted, and the fourth quarter's GDP growth was 2.7%. I want to point out right immediately that 2.7% growth is a good result in light of the Fed's monetary policy tightening over the past year. The US economy experienced negative growth in the first two quarters of last year, but after that, it started to rebound, and today there is no mention of a potential recession.

At the same time, the initial estimate mentioned 2.9%, which is precisely the figure the market was anticipating today. After the news was released, there was a minor drop in the demand for US dollars, which prevented the instrument from continuing its much-delayed collapse. Wave C will either be finished as planned or the wave pattern will need to be adjusted, which is not what we want. British quotes are currently declining quite slowly, but this is normal and corresponds with the wave pattern. Therefore, the expectations for the pair are very clear. Yet, things could go bad if the news environment does not continue to support the US dollar. It's possible that Friday, the final day of the week, will be just as dull as the days before it. The background news will once more be weak. The British and European currencies may continue to fall gradually while making minor upward movements in response to the backdrop news.

Conclusions in general

The development of a downward trend section is implied by the wave structure of the pound/dollar pair. Currently, sales with targets at the level of 1.1508, or 50.0% Fibonacci, might be taken into account. The peaks of waves e and b could be used to place a Stop Loss order. Wave c might be shorter, but for the time being, I anticipate a further 300-point drop (from current levels).

The image resembles that of the euro/dollar pair at higher wave scales, but there are still minor differences. The upward correction section of the trend has now been completed. If this presumption is true, then we must wait for the development of a downward section to continue for at least three waves with the possibility of a decrease in the area of Figure 15.