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For GBP/USD, the wave structure continues to indicate the formation of a bullish trend segment (bottom chart), but over the past six months it has taken on a complex and extended form (top chart). The trend segment that began on July 1 can be considered wave 4, or any global corrective wave, since it clearly has a corrective rather than an impulsive internal wave structure. The same applies to its internal sub-waves. The downward wave structure that started on September 17 has taken the form of a five-wave a–b–c–d–e pattern and has been completed. The instrument is now in the process of forming a new bullish wave sequence.
Of course, any wave structure can become more complex and extended at any moment. Even the presumed wave 4, which has been developing for six months, could take on a five-wave form, in which case we would observe a correction for several more months. However, at the moment, there is a strong chance that a bullish wave sequence is forming. If this is indeed the case, the first two waves of this segment have already been completed, and we are now observing the construction of wave 3 or C, which is taking on an impulsive character and gives hope that the current wave sequence will also be impulsive.
During Wednesday, GBP/USD fell by 60–70 basis points, although intraday losses were much deeper. The rebound from the intraday lows in the second half of the day is encouraging. The fact that the market quickly bought back the dip suggests there is no strong desire to sell the British pound. In my view, there have been no additional reasons this week to sell the British currency.
Unfortunately, inflation in the UK slowed to 3.2% (both headline and core), so the outcome of tomorrow's Bank of England meeting can already be considered largely predetermined. Today's UK inflation report was, by and large, the only truly interesting event. By pricing in this report, the market has effectively also priced in tomorrow's BoE rate cut. Of course, Thursday will not be limited to the interest rate decision alone, and the BoE meeting will not be the only event scheduled. There will once again be plenty of important developments, not least the U.S. inflation report, which is even more important than the UK data. Nevertheless, the market has already drawn its main conclusion regarding the BoE meeting—and has already acted on it.
Despite the pullback from this week's highs, I expect the bullish wave sequence to continue forming. However, I would like to remind you that this week features a strong news backdrop both in the UK and in the U.S., which does not happen very often. Therefore, it is best to make forecasts for the coming weeks on Friday or over the weekend, when the full picture of the market's reaction to the news will be clearer.
The wave picture for GBP/USD has changed. We are still dealing with a bullish, impulsive trend segment, but its internal wave structure has become complex. The downward corrective structure a–b–c–d–e within C of wave 4 appears complete, as does wave 4 as a whole. If this is indeed the case, I expect the main trend segment to resume, with initial targets around the 3.8000 and 4.0000 levels.
In the short term, I expected the formation of wave 3 or C with targets near 1.3280 and 1.3360, which correspond to the 76.4% and 61.8% Fibonacci levels. These targets have been reached. Wave 3 or C continues to develop, and the current wave sequence is beginning to take on an impulsive character. Consequently, further price appreciation can be expected, with targets around 1.3580 and 1.3630.
The higher-timeframe wave structure looks almost ideal, even though wave 4 moved above the high of wave 1. However, I would like to remind you that perfect wave structures exist only in textbooks. In practice, everything is much more complex. At this time, I see no reason to consider alternative scenarios to the bullish trend segment.
Key Principles of My Analysis:
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