01.02.202113:18 Forex Analysis & Reviews: Analysis of GBP/USD on February 1, 2021. Bank of England meeting

The section of the trend, which originates on September 23, took a five-wave complete form. But the internal wave structure of the proposed 5-5 still does not look entirely convincing and may require additions and adjustments. Nevertheless, the upward trend has been nearing its end for a long time. The demand for the sterling, however, remains quite high, and this factor can lead to a further complication of the upward trend.

On the younger chart, the wave counting looks rather complicated. This is because in recent weeks the instrument has been trading in a very narrow range, without canceling the construction of the upward trend section. At the moment, the instrument quotes may continue to rise within the wave 3-5-5, although this wave is taking on a rather extended form. The internal wave counting of wave 5-5 does not look entirely convincing. In recent weeks, the instrument has been trading between 100.0% and 127.2% Fibonacci levels.

While the UK and EU are fighting over the vaccine, the markets are focused on the upcoming meeting of the Bank of England. Let me remind you that the key intrigue of this event will be the key rate cut. To be more precise, the Bank of England is unlikely to lower it in February, but it is also unlikely to be able to avoid comments on this issue. Markets have long been waiting for the British Central Bank to continue to ease monetary policy, but Governor Andrew Bailey still doubts the appropriateness of this step. Thus, the markets will be waiting this Thursday for information on how the Bank of England is at least close to the decision to introduce negative rates. If Bailey or one of the members of the monetary committee announces that such a decision may be made shortly, or during the vote, several committee members support the decision to lower the rate, it could finally stop the rise of the pound. Thus, special attention should be paid to rate voting and press conferences after the results are announced.

Meanwhile, the PMI in the UK manufacturing sector turned out pleasing as the European one. The index rose from 52.9 to 54.1. However, at the beginning of the new trading week, the pound is trading extremely calmly and does not react to economic reports. Today, two indices of business activity in the manufacturing sector will also be released in America. Strong readings may support demand for the US dollar. However, given that all four indices are well above the 50.0 mark, it is unlikely that the values will surprise the markets to begin trading based on these reports. The pound sterling is now generally frozen around the 1.3750 mark, which greatly complicates the current wave counting, but does not cancel the building of the upward trend.

General conclusions and recommendations:

The Pound-Dollar pair continues to build the upward trend. Thus, at present, I recommend buying the instrument in case of a successful attempt to break the 1.3750 mark with targets located near the 40th figure, within the expected 3-5-5 waves of the upward trend. So far, there are no clear signals about the end of the upward trend.