The wave counting for the Pound/Dollar instrument raises no less questions than for the Euro/Dollar instrument. The construction of the upward trend that had just begun was replaced by a sharp decline in the instrument quotes. Thus, now the last decline is identified as a new three-wave structure or wave e. In any case, the wave counting becomes more complicated and confusing again. A successful attempt to break through the 38.2% Fibonacci level indicates that the markets are ready to continue selling the instrument, so a new downward wave may acquire a rather extended form.
However, this conclusion does not make the current wave counting clearer. I have already said that the wave picture should not be as accurate as possible, but a working one, so that you can open deals and earn money using it. At the same time, the instrument is under the influence of the news background, which is not possible to predict. There is good reason to believe that the current decline in the pound is due to an increase in the number of coronavirus cases in the UK. If this is true, then the pound may decline until the incidence subsides.
The Pound/Dollar instrument has dropped 220 basis points over the past two days, although the news background of the economic plan was practically absent these days. On Monday and Tuesday, absolutely no economic news came from either Britain or the United States. Moreover, there is little news in the US now, so the conclusion here is unambiguous - the decline in the pound depends solely on news from the UK. But since this news is not economic, it means that it is associated with the pandemic. Probably, the markets are very much afraid that there will be a new wave of the epidemic in Britain, although it is already taking over the country and its inhabitants with might and main. Nevertheless, at the moment, the situation with hospitalizations and mortality is not critical. At least, this is the opinion of the British government, headed by Boris Johnson, since now there is no question of resuming quarantine.
On the contrary, all quarantine measures were canceled this Monday. Hopefully, the Boris Johnson administration knows what it is doing. But the markets are clearly of a different opinion. The last time such a strong decline in the pound was when the Fed hinted at the possible completion of the asset purchase program a few weeks ago. One thing is clear - the pound can recover for a long time after these losses due to the pandemic. There is still nothing to single out from economic reports and events. And there is a feeling that the markets are not interested in them at all now. Thus, there is no reason to assume that tomorrow the markets will react to the report on the volume of borrowed funds by the public sector.
At this time, the wave pattern remains very complex. The construction of the downward trend has resumed and can continue for as long as necessary. But at the same time, the last downward wave can end at any moment, since it largely depends on the news background. Thus, I recommend selling the instrument after a successful breakout of the 38.2% level, which equates to 1.3643, with targets located around 1.3455 for each MACD down signal.
The upward part of the trend, which began its construction a couple of months ago, has taken on a rather ambiguous form and has already been completed. However, the wave counting still looks rather complex, as there is no impulse movement now. At this time, presumably, the construction of a complicated downward trend section continues.
The material has been provided by InstaForex Company - www.instaforex.com