FX.co ★ Analysis of GBP/USD on February 12, 2024

For the pound/dollar pair, the wave analysis remains quite clear, and at the same time, it remains complex. The construction of a new downward trend section continues, the first wave of which has taken on a very extended form. The second wave has also been extensive, giving us every reason to expect a prolonged construction of the third wave.

At the moment, I am not confident that the construction of wave 2 or b is complete. The retreat of quotes from the achieved peaks must be bigger to consider it a guaranteed start of wave 3 or c. Wave 2 or b has already taken on a five-wave form, but it remains corrective and should be completed soon (or is already completed). Nevertheless, we continue to observe the construction of new internal waves, which are currently very difficult to attribute to any specific wave of a larger scale.

Targets for the pair's decline within the assumed wave 3 or c are located below the level of 1.2039, which corresponds to the low of wave 1 or a. Unfortunately, wave analysis is complicated and does not correspond to the news background. At this time, I do not reject the working scenario; a successful attempt to break the 38.2% Fibonacci level indicates the market's readiness to sell the pound.

The exchange rate of the pound/dollar pair decreased by 12 basis points on Monday. The day is not over yet, but much is already behind us. Therefore, I can draw some conclusions. Demand for the pair moderately increased in the first half of the day, but in the second half, it decreased. In a few hours, Bank of England Governor Andrew Bailey will begin his speech, and I have every reason to believe that his rhetoric may help sellers in the market.

Why do I think so? The Bank of England has yet to raise rates for several meetings. At the January meeting, for the first time in a long time, one of the members of the Monetary Policy Committee voted to lower the interest rate. Andrew Bailey stated that the new tightening of monetary policy is unlikely to be needed. If all these facts are taken together, it turns out that the sentiment of the British regulator is becoming less "hawkish."

The report on British inflation this week could spoil everything since a few tenths of a percent forecast its increase at the end of January. However, this report has yet to be released, and I cannot know its values in advance. Therefore, let's not get ahead of ourselves. Any "dovish" phrase from Andrew Bailey can lower demand for the British pound. However, today, we may not see much market movement since the BofE governor may well avoid the topic of monetary policy.

General conclusions

The wave pattern of the pound/dollar pair suggests a decline. At the moment, I am considering selling the pair with targets located below the level of 1.2039 because wave 2 or b cannot last forever, just like a sideways trend. A successful attempt to break the level of 1.2627 became a signal for sales. In the near future, another signal may form in the form of an unsuccessful attempt to break this level. If it appears, then confidence in the decline will also appear at 1.2468, which will already be a significant achievement for the dollar, but demand remains very low.

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