FX.co ★ Analysis of GBP/USD. December 18th. The pound is in no hurry to fall, but no other way is seen yet

For the pound/dollar pair, the wave analysis remains quite understandable and, at the same time, continues to be complicated. The construction of a new downtrend continues, the first wave of which has taken on a rather prolonged form. The second wave has also turned out to be quite extensive, which gives us every reason to expect the prolonged construction of the third wave.

At the moment, I don't know if the construction of wave 2 or b is complete. The pullback of quotes from the peaks reached is too small to consider it a guaranteed start of wave 3 or c. The rise in the pound quotes against the backdrop of the Bank of England and Fed meetings led to a significant increase, and now wave 2 or b has taken on a five-wave form. However, it remains corrective and should end soon. Targets for lowering the pair within wave 3 or c are located below the 1.2039 mark, corresponding to the low of wave 1 or a.

Unfortunately, wave analysis tends to be complicated, and the news background needs to pay more attention to the wave pattern and try to correspond to it. At this time, I am not abandoning the working scenario, but there is a danger of transforming the entire wave structure.

The exchange rate of the pound/dollar pair hardly changed on Monday. Throughout the day, the market pulled the rope in one direction or another, but these efforts did not lead to significant changes in the pair's exchange rate. The main thing now is the wave analysis of the pair. Wave 2 or b has complicated to its maximum state. Any further increase in pound quotes will lead to the entire wave pattern taking on an unreadable form. I want to remind you that trading based on simple and understandable wave structures is best. If a trend segment takes on too complex a form, it becomes very difficult to play the movement. Certainly, complex structures are also an integral part of the overall movement, but caution is needed here.

What can we expect this week? In the UK, reports on inflation and GDP will be released. These two reports can seriously influence market sentiment. The consumer price index may slow down in November to 4.4%, which cannot be called a "sharp decline" but a "decline within the trajectory." Inflation in the UK continues to slow down, and this is a fact. If there are no spikes in its acceleration, the Bank of England may abandon plans to tighten monetary policy early next year, putting pressure on the pound.

As for GDP, it currently takes a lot of work to expect a high value from this indicator. The economy will grow by 0% in the third quarter and slightly contract in the fourth. Such values are unlikely to allow the market to increase demand for the pound.

General conclusions

The wave pattern of the pound/dollar pair suggests a decline within the descending wave 3 or c. At this time, I recommend selling the pair with targets located below the 1.2039 mark because wave 2 or b must eventually end and can end at any moment. The longer it turns out, the stronger the fall of the pound will be. The peak of the presumed wave e in 2 or b can be used for sales, and the order limiting possible transaction losses can be placed above it.

The picture is similar to the euro/dollar pair on a larger wave scale, but there are still some differences. The descending corrective part of the trend continues its construction, and its second wave has already taken on an extended form – at 61.8% from the first wave. An unsuccessful attempt to break through this mark may lead to the start of building 3 or c.