FX.co ★ Analysis of GBP/USD pair on June 26th. The UK GDP report will not save the pound

For the GBP/USD pair, the wave analysis remains quite complex and ambiguous. A successful attempt to break through the Fibonacci 50.0% level in April indicated the market's readiness to form a downward wave 3 or c, but since then, we have only seen increases. If this wave does resume its formation, the wave pattern will become much simpler, and the threat of complicating the wave analysis will disappear. However, in recent weeks, there has been a complete absence of declines in the instrument, which again raises doubts about the market's readiness for sales.

In the current situation, my readers can still count on the formation of wave 3 or C, with targets located below the low of wave 1 or A at the 1.2035 mark. Therefore, the British pound should decline by at least another 700-800 basis points from current levels. With such a decline, wave 3 or C would be relatively small, so I expect a much greater drop in quotes. It may take a lot of time to build the entire wave 3 or C. Wave 2 or B took 5 months to form, and that was just a corrective wave. The last corrective wave was very lengthy, but the unsuccessful attempt to break through the 1.2822 mark again allows us to look downwards.

The decline of the British pound is gradual, but the market has enough time.

The GBP/USD exchange rate fell by 30 basis points on Wednesday, and the range of movements remains very small. However, this does not mean that the pound cannot form a downtrend wave. I remind you that movements can vary. Sometimes, we see rapid declines or rises of the instrument by several hundred points in a matter of days. Currently, it's the opposite. The pound could lose 30 points in value every day for several months, and the nature of such movement will be similar to movements of the first type.

At the beginning of this week, there was no news background, but currently, the market doesn't need it much. The instrument has been engaged in building more and more corrective upward waves for a long time, but despite these movements, it has kept the downtrend structure. Therefore, I continue to expect a decline in the instrument. The depth of this decline will depend on the structural news background until the end of the year.

This week, I expect the GDP report for the UK. In the last quarter, the British economy showed higher growth rates than expected by the market, which hypothetically could increase demand for the pound. However, structural problems in the British economy will not be solved by this report. It's worth reminding that over the past ten years, the UK economy has faced numerous political and geopolitical challenges, upcoming parliamentary elections, and the Bank of England may begin transitioning to a more "dovish" monetary policy as early as August. These factors work against the British pound.

General conclusions.

The wave pattern of the GBP/USD instrument still suggests a decline. At the moment, I continue to consider selling the instrument with targets below the level of 1.2039, as I believe that wave 3 or C has yet to be canceled. Since the instrument reversed near the level of 1.2822, not far from the peak of the presumed wave 2 or B, selling the instrument can be considered with initial targets around the level of 1.2315. However, caution is advised because confidence in the market's shift to a "bearish" sentiment will come after a successful attempt to break below 1.2627.

On a larger wave scale, the wave pattern is even more revealing. The descending corrective phase of the trend continues its development, and its second wave has taken on an extended form – up to 76.4% of the first wave. An unsuccessful attempt to break through this level could have led to the beginning of constructing wave 3 or C, but currently, a corrective wave is forming.

Key principles of my analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to play out, as they often change.
2. If there is no confidence in the market situation, it's better not to enter it.
3. There can never be 100% certainty about the direction of movement. Remember protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.