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The wave analysis of the pound/dollar pair must still be more complex and clear. After a horizontal corrective phase, I expected a similar downward movement. Still, the increase in quotes over the past 2-3 days suggests that the market is ready to build a full-fledged upward trend segment. The presumed wave 2 or b could have completed its formation this week (although I am still trying to convince of it). If that is the case, the formation of an upward wave 3 or c has already begun. The British pound has a good opportunity to rise to the range of 26-30 figures.
In this case, the wave analysis of the EUR/USD pair will differ significantly from the GBP/USD. The euro is expected to form a downward wave set, while a hypothetical complication of the upward trend segment is not currently on the agenda. On the other hand, the British pound is forming a new upward trend segment. The news background for the British pound has remained largely unchanged recently, so it is difficult to determine what drives the market's increased demand.
UK manufacturing activity remains below 50
The pound/dollar exchange rate increased by 70 basis points on Thursday, with the pair's volatility remaining high for three consecutive days. Today, it started with a decline, which seems much more logical than the rise. In the UK, the final value of the manufacturing activity index for May was released this morning (and this is the only morning report for the pair). It stood at 47.1 points compared to the previous month's value of 47.8 and market expectations of 46.9. Regardless of the index value, any value below 50.0 should be considered negative. Therefore, this report could not be the basis for a 70-point increase in the British pound. No other news releases, unlike the euro, had Christine Lagarde's speech and the inflation report today.
Moreover, the US statistics were positive. The ADP report on private sector employment showed an increase of 278,000 jobs compared to market expectations of only 170,000. The number of initial jobless claims was 232,000, slightly higher than market expectations. Therefore, the US statistics were not weak and should have boosted demand for the US dollar. The same applies to the ISM Manufacturing PMI. Its value was 46.9, which is below the key level of 50.0. This report was released last when the pair had risen by 70 points from the day's opening. Based on this, the issue is not weak manufacturing activity. If the British pound does not resume its decline soon, it may affect not only its wave analysis but also the wave labeling of the euro.
The wave pattern of the pound/dollar pair has long suggested the formation of a downward wave. Wave b could be very deep since the recent waves have been approximately equal in length. However, the successful attempt to break the 1.2445 level, which corresponds to 100.0% Fibonacci, indicates the market's purchase readiness, which could disrupt the current scenario. Therefore, I recommend selling the pound with targets around the 23 and 22 figures, but now we must wait for signals to resume the downward wave.
The pattern is similar to the euro/dollar pair on a larger wave scale, but some differences remain. The downward corrective phase of the trend has been completed, but a downward wave could begin now, which could be deep and extended, while the entire trend segment could be horizontal, similar to the previous one.
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