Wave pattern
The wave counting for the Pound/Dollar instrument continues to look complicated due to deep corrective waves as part of the downward trend section, but at the same time, it is quite convincing. Even inside the last wave C, presumably five internal waves are visible, and each subsequent one is approximately equal in size to the previous one. At the same time, wave C can already be completed if it has taken a three-wave form. If it does take a five-wave form, then wave d is completed, and now the decline in the quotes of the instrument within wave e will continue.
If this assumption is correct, then the decline of the instrument will continue with targets located near the minimum of wave c, that is, about 34 figures. A successful attempt to break through the peak of wave b will lead to the need to introduce new adjustments to the current wave counting.
Wednesday may turn out to be a good day for the US dollar.
The rate of the Pound/Dollar instrument on Tuesday showed an amplitude equal to 20 basis points. There was no active trading of the pair this day as the market was rather calm due to the absence of the news background. However, we may expect something better tomorrow as several reports and events is scheduled in both the UK and the US. And among these, the Fed meeting is of particular importance.
In the morning, the UK is expected to release the report on business activity in the service sector for October. A strong change is not expected, but the British pound may show slight movements after this report. In the US, there will be more important statistics and will start with the ADP report, which is the predecessor to the Nonfarm Payrolls report, which will be released on Friday.
Note that the ADP report is less important, but also reflects the state of the US labor market, which has raised some questions in recent months. It is unlikely that the significance of the ADP report will somehow affect the results of the Fed meeting in the evening. All relevant decisions will have already been taken by that time. However, the report itself can also upset or please the markets in relation to the US currency.
In addition, a rather important ISM business activity index for the services sector will be released. In recent months, it has been consistently above 60, so it is unlikely to significantly decrease compared to this value. And if the Fed announces the tapering of QE, then the whole of tomorrow may be good for the dollar. Anything can be expected from the ADP report though, as it almost never matches the Nonfarm Payrolls report.
General conclusions
The wave pattern of the Pound/Dollar instrument looks quite convincing now. It received a downward view, but not an impulsive one. The expected wave d has completed its construction, so I advise you to sell the instrument based on the construction of the expected wave e in C with targets located near the level of 1.3270.
Starting from January 6, the construction of a new downward trend section began, which can turn out to be of almost any size and any length. At this time, I still expect the construction of another downward wave, since wave A turned out to be of five waves. The peak of wave b has not been broken yet, so I am expecting a new decline in quotes.
The material has been provided by InstaForex Company - www.instaforex.com