FX.co ★ GBP/USD. Analysis for October 26th. The American economy is growing rapidly

For the GBP/USD pair, the wave count remains quite simple and clear. The construction of a new bearish trend section continues, the first wave of which has taken on a fairly extended form. In my opinion, the pound has no reason to resume the bullish trend section, so I don't even consider such a scenario. The assumed wave 1 or a is complete, although this conclusion is not as evident for the pound as it is for the euro. Wave 2 or b already has a three-wave structure for the euro, but not for the pound. Certainly, the corrective wave can be as simple as possible, but I still believe it should take on a minimum three-wave structure. However, a successful attempt to break the 1.2120 level, which equates to 76.4% according to Fibonacci, brings the instrument closer to the construction of wave 3 or c.

The internal wave structure of the first wave of the new trend section looks complex, and it is difficult to discern five waves within it. However, five waves are visible for the euro. If the global wave is completed for the euro, it is also likely to be completed for the pound, with an 80% probability. However, the situation with wave 2 or b is not as straightforward. I believe the correction may continue despite the recent days' decline.

U.S. statistics could trigger a new dollar rally.

The GBP/USD currency pair did not change much on Thursday, although it initially dropped by 40 basis points during the day, then rebounded by the same amount. However, the increase in pound quotes occurred while reviewing the ECB meeting results. The ECB kept its interest rate unchanged, so the increased demand for the euro was not entirely justified. As usual, the euro pulled the pound along with it. At present, the market has completely disregarded American reports, which are essentially more significant than the results of the ECB meeting. There were no changes in the ECB's monetary policy, but two key indicators of the American economy greatly pleased U.S. dollar buyers.

The preliminary estimate shows that GDP in the third quarter increased by 4.9%. Market expectations were +4.3% q/q, and the previous value was +2.1%. GDP not only increased significantly in the third quarter but also exceeded market expectations. The same applies to the second report on durable goods orders. Their volume not only increased but also exceeded market expectations by almost three times, with a +4.7% m/m in September. Based on this, I believe that demand for the U.S. dollar will increase again in the near future. Economic statistics once again reflect that the state of the American economy, if not excellent, is still outstanding, given the Federal Reserve's interest rate of 5.5%. This means that the FOMC can raise interest rates again without worrying, which is a bullish factor for the dollar. The statistics themselves should also increase demand for the U.S. dollar.

Overall Conclusions

The wave pattern for the GBP/USD pair suggests a decline within the bearish trend section. The maximum the pound can expect is the construction of wave 2 or b. However, even with the corrective wave, there are significant problems for now. Currently, I would not recommend new sales, but I also do not recommend buying because the corrective wave appears to be relatively weak. In any case, this is a corrective wave. Sales will be possible if there is a successful attempt to break the 1.2120 level, but they should be very cautious at first.

On a larger time scale, the picture is similar to the euro/dollar pair, but there are some differences. The descending corrective trend section continues its construction, and its first wave has already taken on an extended form and is clearly not related to the previous bullish trend section.