FX.co ★ Analysis of the GBP/USD pair on April 18, 2024

The wave analysis of the GBP/USD pair remains quite complex but may become simpler in the coming weeks. A successful attempt to break the Fibonacci level of 50.0% indicates the market's readiness to build a downward wave 3 or C. If this wave continues its formation, the wave pattern will become much simpler, and the threat of complicating the wave analysis will disappear.

As I noted, the wave pattern should be simple and understandable. There needs to be more simplicity and understanding in recent months. The pair has been in a sideways trend for a long time and only now has real chances to build an impulsive wave. But even now, there is a threat that everything will end with a resumption of horizontal movement, with only slight boundary changes.

In the current situation, my readers can only hope for the formation of wave 3 or C, the targets of which are below the low of wave 1 or A. Therefore, the Briton should decline by at least 500-600 basis points. The news background supports the US dollar, and after breaking the 1.2469 mark (50.0% Fibonacci), the psychological blockade has been removed from sellers.

The GBP/USD pair rate increased by 10 basis points on Thursday, adding 25 the day before, and the amplitude throughout the current week did not exceed 25-30 points. Market activity has been very weak, so we have not seen significant price changes over the past four days. Friday could be a logical end to the boring period in the currency market.

The pound is stuck in the mud again, as prosaic as it may sound. I would not like to use various literary epithets, but one could already write plays about the resilience of the British pound in 2024. Horizontal movement has been observed for several months. It was observed that there were many reasons for the market to sell the British currency. Finally, what many have been waiting for has happened - the breakthrough of the 1.2470 mark. A week has passed since then, and the pound has not declined by even 50 points.

Interestingly, even during the current week, there were reasons for the pound to decline. The inflation report in the UK showed another slowdown, and Jerome Powell practically refused to consider lowering interest rates in June. Once again, the market expected the rate to be lowered for a long time in June. The market was wrong for the second time in a row. And it may be wrong many more times if it continues to be so optimistic.

As a result, we have a situation where the first easing of the Bank of England's policy is approaching, while the moment of the first easing in the US is receding. And this process has been going on for several months. If this is not reason enough for the pound to decline, then what is? What does the Fed need to do to increase demand for the dollar? Raise the rate by another 1%.

General Conclusions.

The wave pattern of the GBP/USD pair still suggests a decline. At the moment, I continue to consider selling the pair with targets below the 1.2039 mark, as wave 3 or C has begun its formation. A successful attempt to break the 1.2472 mark, which corresponds to 50.0% according to Fibonacci, indicates the long-awaited readiness of the market to build a downward wave.

On a larger wave scale, the wave pattern is even more eloquent. The downward correctional trend section continues its formation, and its second wave has taken on an extended form - to 76.4% of the first wave. An unsuccessful attempt to break this mark could have led to the beginning of the formation of wave 3 or C.

The main principles of my analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play out and often change.
2. If there is confidence in what is happening in the market, it is better to avoid entering it.
3. There is never 100% certainty about the direction of movement. Remember about Stop Loss protective orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.