FX.co ★ GBP/USD analysis. November 21st. Dave Ramsden supports the pound

For the pound/dollar pair, the wave analysis remains quite simple and clear. The construction of a new downtrend section continues, and its first wave has taken on a rather prolonged form. There is no reason for the British pound to resume the upward trend section, so I don't even consider such a scenario. The presumed wave 1 or a is complete. Regarding the euro, wave 2 or b already has a five-wave structure, while the pound has taken on a three-wave structure. Thus, for both pairs, wave analyses currently allow for the resumption of the decline. This is the moment I've been waiting for. For the British pound, the structure of wave 2 or b had to take on at least a three-wave form for its completion to be expected.

The wave pattern currently looks good and convincing. If not for the US inflation report last week, we would have already seen a continuation of the pair's decline and become even more convinced of the transition to wave 3 or c construction. US statistics this month have been very disappointing, causing the construction of a corrective wave to drag on.

There are no reports, but there is news that will please the pound. The exchange rate of the pound/dollar pair increased a bit on Tuesday. Demand for the British pound is slowly growing, giving it a decent appreciation compared to the dollar. Despite not seeing any reports in the US or the UK for several days, the market constantly finds reasons to increase demand for the pair. The main scenario remains the completion of wave 2 or b construction with subsequent significant decline. However, it should be acknowledged that wave 2 or b can take almost any length.

Today, one of the members of the Bank of England's Board, Dave Ramsden, made a speech. Before the Treasury Committee of the UK Parliament, he stated that a high interest rate would be appropriate for some time. He also did not rule out a new tightening of monetary policy in the future, but, as before, the wording remained "if necessary." He noted the problems in the British economy, which began with Brexit, continued during the pandemic, and are now related to the high cost of borrowing. Ramsden cited several household surveys, indicating that Britons expect sustained inflation above the target.

The fact that the Bank of England is still determining new tightening may further support demand for the British pound. However, the market has been aware of this information for a long time, and everything is familiar. In some cases, the ECB also allows for new tightening. And the Fed does, too. In practice, inflation in the UK has dropped below 5%, and if it falls even further by the end of the year, there will be no need for tightening.

General conclusions.

The wave pattern of the pound/dollar pair suggests a decrease within the descending trend section. The maximum the British pound can count on is a correction. I recommend selling the pair with targets below the 1.2068 level because wave 2 or b will eventually be completed. Initially, sales should be insignificant because there is always a risk of complicating the existing wave.

The picture is similar to the euro/dollar pair on a larger wave scale, but there are still some differences. The descending correctional trend section continues its construction, and its first wave has already taken on a prolonged form and has nothing to do with the previous upward trend section.