The wave pattern of the GBP/USD pair has entirely not changed in recent weeks. The pound has been strictly in a side channel, namely below the 0.0% Fibonacci level for more than two weeks, and still remains there. In fact, even a slight decline in the quotes of the instrument over the past two weeks does not have a strong impact on the pattern. Therefore, after the proposed wave e completed its formation, the correction wave structures began, which are very difficult to determine for any particular wave of the higher scale and it does not make much sense, since it is unlikely to develop them anyway. An unsuccessful attempt to break through the 0.0% Fibonacci level indirectly indicates the completion of not only the last upward wave but also the entire uptrend section. On the other hand, the wave pattern of the upward trend can still take on a more complex form, and weak demand for the US dollar only increases the chances of further price growth in the end. A successful attempt to break through the 0.0% Fibonacci level will complicate the upward set of waves.
On Tuesday, this instrument initially lost about 90 basis points, and then gained about 60. Thus, the instrument really moves away from the 0.0% Fibonacci level, but it does it very slowly. During the day, the UK released a report on the unemployment rate, which showed its reduction to 4.7%. This is considered positive news. 93 thousand fewer applications for unemployment benefits were also recorded in the country than a month earlier. Wages strongly increased too. However, the Governor of the Bank of England, Andrew Bailey, did not want to share important information with the markets. As we can see, almost all the news of the first half of the day was in favor of the pound; despite this, its demand noticeably declined since Boris Johnson extended the quarantine for another 1 month. The British government came to this decision after the number of cases of coronavirus is growing in the country for several weeks in a row, even though most of the population has already received a vaccination. It is worth noting that COVID-19 is spreading again this time and most of the patients were infected with the "Indian" strain, which is considered more contagious. Thus, there are serious concerns again about the pace of recovery of the British economy. Given the current situation, it does not make sense to talk about a possible increase in the Bank of England rate. The pound sterling ended up under pressure because of this news.
At the moment, the wave pattern continues to be twofold. The pound continues to move almost horizontally. Currently, it is still unclear whether the proposed wave e has completed its construction. It is still recommended to sell the instrument with a protective order above the level of 1.4240, which corresponds to 0.0% Fibonacci. But once the level of 1.4240 is broken, it will be possible to buy. This strategy remains unchanged at this time. Given that the instrument does not make any attempts to break through the specified level, one can simply remain in sales with the Stop Loss set above it. This strategy is very successful since the quotes of the instrument have already left the reached highs by more than 100 basis points.
The upward part of the trend, which started to form a few months ago, is taking on a quite vague form. It was mentioned above that several wave pattern options are possible at once. Unfortunately, different options offer different further developments. Therefore, it may be necessary to wait for some time for the current wave pattern to slightly clear up.
The material has been provided by InstaForex Company - www.instaforex.com