19.05.202500:35 Forex Analysis & Reviews: British Pound. Weekly Preview

The British news background for the upcoming week will be about the same low significance as the European one. However, one report in the UK cannot be ignored—the Consumer Price Index (CPI) for April.

Inflation used to carry considerable weight for central banks, but over the past few months, it has significantly decreased in the UK, the EU, and the US. As a result, its influence on monetary policy decisions has also diminished. However, UK inflation is expected to spike sharply this time and reach 3.3% in May. Recall that at the last meeting, the Bank of England cut interest rates for the second time this year, and now, inflation might accelerate substantially. If that happens, the next round of monetary easing may not occur for quite some time.

The most obvious outcome is a new upward move. The pound is forming a corrective wave within an upward trend segment, so I do not expect strong appreciation of the US dollar under any circumstances. Rising inflation would mean that monetary easing could be placed on an extended pause. The market continues to sell the dollar more enthusiastically than the pound. Therefore, assuming there is a good chance of seeing another rise in GBP/USD next week is reasonable.

Among other economic data, it's worth noting two speeches by the Bank of England's Chief Economist, Huw Pill, who may clarify the central bank's future actions in light of strong inflation growth. Business activity indices for May's services and manufacturing sectors will also be released, though both are likely to remain below the 50.0 mark. A retail sales report will be published on Friday, but its importance is no greater than that of the business activity indices. Therefore, I believe the most noteworthy events will be Huw Pill's speeches and the inflation report.

Wave Pattern for EUR/USD:

Based on the conducted analysis, EUR/USD continues to build an upward trend segment. In the near term, the wave structure will depend entirely on the stance and actions of the U.S. president—this must be constantly kept in mind. Wave 3 of the upward segment has begun forming, and its targets may stretch up to the 1.25 level. Achieving these targets will depend solely on Trump's policies. At present, wave 2 within wave 3 may be considered complete. Therefore, I continue to consider buying opportunities with targets above 1.1572, which corresponds to the 423.6% Fibonacci level. It's important to remember that a de-escalation in the trade war could reverse the upward trend, but there are no wave-based signs of a reversal at the moment.

Wave Pattern for GBP/USD:

The wave pattern for GBP/USD has shifted. We are now dealing with an impulsive upward segment. Unfortunately, under Donald Trump, the markets may still face many shocks and reversals that defy wave logic and most forms of technical analysis. The upward wave 3 continues to form, with nearby targets at 1.3541 and 1.3714. Therefore, I continue to consider buying opportunities, as the market does not yet desire to reverse the trend again.

Core Principles of My Analysis:

1. Wave structures should be simple and clear. Complex patterns are hard to trade and often require adjustments.
2. If you're uncertain about what's happening in the market, it's better not to enter.
3. Absolute certainty in market direction is never possible. Always use protective Stop Loss orders.
4. Wave analysis can and should be combined with other analysis and trading strategies.