FX.co ★ GBP/USD. Analysis for February 1st. Andrew Bailey did not answer the question on rates

For the pound/dollar pair, the wave analysis remains quite clear yet continues to become more complex. The construction of a new bearish trend segment continues, with its first wave having a prolonged appearance. The second wave has also turned out to be quite prolonged, giving us every reason to expect the lengthy development of the third wave.

At the moment, I am not confident that the construction of wave 2 or b is complete. The pullback from the achieved peaks is too small to consider it a guaranteed start of wave 3 or c. Wave 2 or b has already taken a five-wave form, but it remains corrective and should be completed shortly (or may have already been completed). Nevertheless, we continue to observe the construction of new internal waves that are currently challenging to attribute to any higher-scale wave.

The targets for a decrease in the pair within the presumed 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 become more complex, and the news background only sometimes corresponds to it. At this time, I am staying in the working scenario, but a few unsuccessful attempts to break the 38.2% Fibonacci level indicate the market's lack of readiness for sales right now.

The Bank of England meeting did not affect the wave picture.

As of the time of writing the review, the exchange rate of the pound/dollar pair on Thursday has not changed. Yesterday, we witnessed the pair's rise and fall; today, it experiences falls and rises. Such alternating movements a priori could not end the sideways trend. Unfortunately, the market is not ready for significant changes, so horizontal movement persists, adding headaches to those trading the British pound.

I want to remind you that the pound sterling has traded sideways for almost two months. Obviously, over such a long period, there were many different events and reports that could and should have taken the market out of hibernation (at least four meetings of the Bank of England and the Fed). Nevertheless, yesterday's FOMC meeting very weakly supported the previously fallen dollar. And today, Andrew Bailey's rejection of further tightening of monetary policy led to an increase in demand for the pound.

I believe that today, the British pound could continue its decline, as Bank of England Governor Andrew Bailey, though he did not answer the question of when the rates would start to fall, has changed his tone to a more "dovish" one. Also, one of the members of the Monetary Policy Committee has already voted for a rate cut, which has not happened in a very long time. The Bank of England's policy is unfolding in the opposite direction, but it is doing so very slowly. Nevertheless, it is still happening while the market continues to resist reducing demand for the pound. The pair's inability to break the 1.2627 mark resulted in it staying within the horizontal channel.

General Conclusions:

The wave picture of the pound/dollar pair suggests a decline. At this time, I am considering selling the pair with targets located below the 1.2039 mark because wave 2 or b must eventually be completed and may end at any moment. However, since we are observing only horizontal movement, I do not recommend rushing with sales. I am waiting for a successful attempt to break the 1.2627 mark, after which it will be much easier to believe in the pair's further decline.

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