FX.co ★ Analysis for GBP/USD on January 9, 2024

As for the GBP/USD pair, the wave analysis remains relatively clear yet continues to become more complex. The construction of a new downward trend segment is ongoing, with the first wave appearing extensive. The second wave has also turned out to be quite extensive, giving us every reason to expect the prolonged development of the third wave.

At this point, the construction of wave 2 or b is not entirely certain. The retreat of quotes from recent peaks needs to be bigger to guarantee the start of wave 3 or c. The rise of the British pound amid the meetings of the Bank of England and the Federal Reserve led to significant growth, and now wave 2 or b has taken on a five-wave structure. However, it remains a corrective wave and should be completed soon (or may have already been completed). Targets for the pair's decline within wave 3 or c are located below the 1.2039 mark, which corresponds to the low of wave 1 or a.

Unfortunately, wave analysis tends to become more complex, and the news background only sometimes corresponds to it. At the moment, I am not abandoning the working scenario, but the danger of transforming the entire wave structure is present.

The British pound will not fall below 1.2627.

On Tuesday, the GBP/USD currency pair experienced a symbolic 25 basis point decline. It is unlikely that this movement poses a threat to the current wave analysis. The pair, as before, is near the presumed peak of wave 2 or b, which should have completed its construction a long time ago. However, the closer it gets to this peak and the longer it remains, the higher the chances that this wave will again take on a more complex and prolonged form. I certainly would not like to see such a scenario, but the market has its own opinion.

There was no significant news background today, either in the UK or the US. This explains the very weak movements of the pair during the day. The market would be willing to continue increasing demand for the pound, but it also understands that it cannot keep rising indefinitely without substantial reasons. In recent days, multiple reports have cast doubt on the possibility of an FOMC rate cut in March (not to mention January). And it was precisely this factor that drove the pound higher in recent weeks or even months.

Now, the market is still determining what to do next. On the one hand, it doesn't want to conclude the formation of an uptrend wave. On the other hand, it needs to start forming a downtrend because the news background increasingly points downward rather than upward. We continue to wait for a resolution.

General Conclusions:

The wave picture of the GBP/USD pair suggests a decline. I am considering selling the pair with targets below the 1.2039 mark because wave 2 or b must ultimately conclude and could do so at any moment. There are already some signs of its completion. However, I would not recommend rushing to conclusions and sales. I would wait for a successful attempt to break the 1.2627 mark, after which it will be much easier to believe in further pair decline.

The picture is similar to the EUR/USD pair on the higher wave scale, but there are still some differences. The descending correctional trend segment continues to develop, and its second wave has already taken on an extended form, reaching 61.8% of the Fibonacci retracement from the first wave. An unsuccessful attempt to break this mark could lead to the start of wave 3 or c.