17.10.202216:53 Forex Analysis & Reviews: GBP/USD analysis on October 17. Clouds are gathering over Liz Truss

For the pound/dollar instrument, the wave marking looks quite complicated at the moment but does not require any clarification. We have a supposedly completed downward trend segment consisting of five waves a-b-c-d-e. If this is indeed the case, then the construction of a new upward trend section has begun. Its first and second waves are presumably completed. Unfortunately, there is no confidence in this particular scenario since the instrument must go beyond the peak of the last wave to show us its readiness to build an upward section of the trend and not complicate the downward one once again. The peak of the nearest wave is located at about 23 figures. Thus, even after the pound has increased by 1000 points, you need to go up another 1000 points to reach this peak. I also want to note that the wave markings of the euro and the pound are different now. If the construction of an upward trend has begun, then the wave marking for the euro should also be transformed into an upward one. So far, the wave marking for the British looks a little more convincing, but the news background should continue to support the euro and the pound. Without this, the demand for the dollar may start to grow again.

Liz Truss may leave her post

The exchange rate of the pound/dollar instrument increased by 120 basis points on October 17. I cannot say that the news background caused today's rise in the British dollar. Now the news background for the British is ambiguous, as the market can interpret what is happening in absolutely different ways. For example, is the resignation of Finance Minister Kwasi Kwarteng a positive for the pound or not? If Liz Truss leaves the post of Prime Minister - is it a positive or not? I believe that it is impossible to answer these questions. However, it should be noted that the current state of things in the British economy can hardly please at least one person in the UK. Thus, the demand for the pound may be growing now because Kwarteng has already left his post, and Truss may leave it in the near future.

Let me remind you that it all started with another plan to save the economy, which implied a large-scale tax cut. Strangely, no one criticized Liz Truss for promoting this initiative even before she became prime minister. However, when the real plan was on the table, criticism poured in from all corners, and now a vote of no confidence can be announced by the Truss. Many ministers in the cabinet, high-ranking officials, party members, and the opposition criticized her. There was even information that a certain group of Tories would demand the immediate resignation of Truss. I believe this news can support the pound because of the tax reduction plan the British pound made last fall. If the head of state changes, then there is no doubt that the new prime minister will take into account the mistakes of the plan, and taxes will not be reduced.

General conclusions

The wave pattern of the pound/dollar instrument implies the construction of a new upward trend segment. Thus, now I advise buying a tool for MACD reversals "up" with targets located above the peak of wave 1. It would be best if you were careful when buying and selling since it is unclear which of the wave markings (euro or pound) will require adjustments, and the news background may negatively affect both the euro and the pound. The decline within the corrective wave 2 may already have been completed.

The picture is very similar to the Euro/Dollar instrument at the higher wave scale. The same ascending wave does not fit the current wave pattern, the same five waves down after it. The downward section of the trend can turn out to be almost any length, but it may already be completed.