Wave pattern
The wave counting for the Pound/Dollar instrument continues to look quite complicated due to deep corrective waves as part of the downward trend section, but at the same time, it is quite convincing. Five internal waves are visible inside the last wave C, and each subsequent one is approximately equal in size to the previous one.
However, since all the waves in the composition of C or A are almost equal in size, the last wave e may already be nearing its completion. I thought it was already completed, but the decline in the quotes of the instrument in recent days has led to a complication of the internal wave structure of this wave.
Thus, now the decline can continue with targets located near the estimated mark of 1.3271, which is equivalent to 61.8% Fibonacci level. By the way, for the Euro/Dollar instrument, a downward wave is also nearing its completion, which may be the last in the entire downward structure. Thus, both instruments can complete the construction of descending trend sections at the same time, as is quite often the case with them.
The pound has certain prospects of strengthening but has no demand
The exchange rate of the Pound/Dollar instrument decreased by 60 basis points on Monday, and by another 30 on Tuesday. Thus, an attempt was made to break through the previous low, which so far looks unsuccessful. At the same time, it may become such today or tomorrow, as demand continues to grow for the U.S. dollar and decline for the British pound.
Reports on business activity in the service and manufacturing sectors were released in the UK today, but, as in the European Union, the data turned out to be contradictory. On the one hand, there is an increase in indicators, as well as their rather high values. On the other hand, there was no strong improvement in these values, which could lead to an increase in demand for the pound. Thus, the markets simply did not pay attention to these reports.
In the U.S., the data on business activity also turned out to be quite contradictory and also did not show anything special. The markets did not pay attention to them either.
Accordingly, there was no news background today, which partly explains the weak amplitude of the instrument during the day (about 30 basis points). Several interesting reports will be released in the U.S. tomorrow, and in the evening – the minutes of the last Fed meeting. Let me remind you that at the November meeting it was decided to taper the QE program by $15 billion per month. The minutes of this meeting can be very interesting and show how many board members support further tapering and rate increases.
General conclusions
The wave pattern of the Pound/Dollar instrument looks quite convincing now. The expected wave e may be nearing its completion, but it has not yet been completed, and the MACD indicator has given a new "down" signal. Thus, now I am waiting for the completion of this wave near the 61.8% Fibonacci level, an unsuccessful attempt to break through which may lead to the construction of a new upward wave. Or even a new upward section of the trend.
Starting from January 6, the construction of a new downward trend section began, which can turn out to be almost any size and any length. At this time, the proposed wave C may be nearing its completion, but there is no confirmation of this yet. The entire downward section of the trend may lengthen, but there are no signals about this yet either.
The material has been provided by InstaForex Company - www.instaforex.com