FX.co ★ GBP/USD. Analysis for July 23rd. The British pound has found significant support

The wave analysis for GBP/USD remains relatively simple and clear. Currently, the upward wave 3 or C has been completed, and the formation of the downward wave has begun. There are no valid reasons for the British pound to continue its upward trend (supported by various reports and events). However, the wave analysis has evolved into a more intricate structure, and the wave 3 or C has taken a more extended form than many analysts anticipated a few weeks ago. The entire upward trend segment may adopt a five-wave pattern if the market finds new reasons for buying. In this regard, there is a certain resemblance with the EUR/USD pair.

For the British pound, the current wave structure is more straightforward and understandable than the euro. The third wave could either conclude the upward wave set or be the third wave of a five-wave structure. Hence, I anticipate forming a downward wave in any scenario, which has commenced almost precisely as expected. Even if a fourth wave appears as part of the upward wave set, it should be extensive or exhibit a three-wave pattern. In the near future, I do not foresee the end of the decline in quotes, but an upward correction is possible.

The British economic statistics did not support the pound.

On Friday, the GBP/USD pair experienced an additional decline of 15 basis points. The amplitude of movements was weak due to the absence of significant news events. The sole report on UK retail sales was released, indicating a 0.7% month-on-month increase in June. The market had anticipated growth of no more than 0.2%. Initially, the market responded with a 25-point increase, but the demand for the British Pound sharply decreased, and the day ended with a minor decline.

A critical point that could lead to an increase in quotes in the first half of the following week is the FOMC meeting and several interesting reports scheduled for release in the US that might impact market sentiment. However, these reports are set for the second half of the week, while the first half might witness the formation of an ascending corrective wave, either wave B in 4 or wave 2 in a new downward trend segment. An unsuccessful attempt to break the level of 1.2840 indicates the market's inclination to move away from the lows reached this week, which might coincide with the formation of the corrective wave.

Considering that the Bank of England's meeting, which will likely result in a 14th consecutive rate hike, is a week and a half away, there is sufficient time for the necessary and minimal three-wave downward structure to form. Next week, we may observe an upward retracement and a resumption of the instrument's decline.

General conclusions:

The wave pattern for the GBP/USD pair suggests a decline in the coming weeks. At present, it is crucial to understand the ongoing situation: whether the fourth wave is being constructed in the upward segment or if the first wave is forming in a new downward trend. As mentioned in my recent reviews, the successful attempt to break the level of 1.3084 (from top to bottom) has led to readers opening short positions. The first target for the pair is currently at 1.2840, which has already been reached. An unsuccessful attempt to break this level at the moment suggests a potential formation of an upward wave. However, if the attempt proves successful on Monday-Tuesday, the decline in quotes may continue as part of the first wave in the minimum necessary three-wave structure.

On a higher wave scale, the pattern is similar to the EUR/USD pair, although some differences remain. The downward corrective trend segment is completed, and the construction of a new ascending one is ongoing, which might already be completed or could evolve into a full-fledged five-wave pattern.