FX.co ★ GBP/USD. Analysis for March 7th. The pound goes against logic and common sense

The wave analysis of the GBP/USD pair remains quite clear and, at the same time, remains complex. The construction of a new downward trend section continues, the first wave of which took on a very extended form. The second wave also turned out to be quite prolonged, which gives us every reason to expect the long construction of the third wave.

At the moment, I am not entirely confident that the construction of wave 2 or b is complete. The retreat of quotes from the peaks reached is too small to consider it a guaranteed start of wave 3 or c. Wave 2 or b has already taken on a five-wave appearance, but it still remains correctional and should be completed in the near future (or has already been completed). Nevertheless, we continue to observe the construction of new and new internal waves, which are currently very difficult to attribute to any specific wave of a larger scale.

The targets for the decline of the pair within the assumed wave 3 or c are located below the level of 1.2039, corresponding to the low of wave 1 or a. Unfortunately, wave analysis has a tendency to complicate and not correspond to the news background. At the moment, I do not abandon the working scenario, but the pound has been trading horizontally for several months.

The pound is approaching the 28-figure mark again.

The exchange rate of the GBP/USD pair increased by 25 basis points on Wednesday and added another 25 today. The amplitude of movements remains relatively weak, but recently, demand for the British pound has been increasing almost every day, providing continuous growth that cannot be ignored. In my opinion, neither yesterday nor today did the news background suggest an increase in demand for the pound. However, the British pound has been rising for several weeks in a row, and during this period, I cannot recall events that sharply contradicted the dollar and were in favor of the pound. On the contrary, in the past month, we learned that the Fed may start lowering rates much later than the market expected in January, and the British economy has officially entered a recession. Why, then, is the pound rising if even the wave analysis contradicts it?

Unfortunately, it is not always possible to answer such a question. Explaining why a pair that has been trading horizontally for more than three months is rising now is like explaining why Bitcoin is rising. Even Bitcoin has much more reasons to grow now than the pound. Yesterday's US reporting was more neutral than weak, and Jerome Powell's rhetoric was not "dovish." I will talk about the speech of the Fed chairman in a separate article, but even now, it should be understood that Powell did not say in Congress about the need to move to policy easing as soon as possible. He did not say that it is better to lower the rate slightly earlier than a little later. Based on this, I consider the increase in pound quotes not to correspond to the news background.

General conclusions.

The wave pattern of the GBP/USD pair still implies a decline. At the moment, I am considering selling the pair with targets located below the level of 1.2039, as I believe that wave 3 or c will gain momentum sooner or later. A successful attempt to break through the level of 1.2627 signaled sales. However, at the moment, I can also highlight the sideways range of 1.2500–1.2821. There are still 50–70 points on the upper boundary of this corridor. As long as the pair remains within the corridor, the sideways movement persists. It is logical to assume that a reversal down may occur near the upper boundary of the corridor.

On a larger wave scale, the picture is similar to the EUR/USD pair, but there are still some differences. The downward corrective trend section continues its construction, and its second wave has acquired an extended form – up to 61.8% of the first wave. An unsuccessful attempt to break this mark may lead to the start of the construction of wave 3 or c.

Basic principles of my analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play with; they often bring changes.
2. If there is no confidence in what is happening in the market, it is better not to enter it.
3. There is never 100% certainty in the direction of movement. Don't forget about protective stop-loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.