For GBP/USD, the wave structure continues to indicate the formation of a bullish impulse wave pattern. The wave picture is almost identical to that of EUR/USD, as the only “culprit” remains the dollar. Demand for it is falling across the market in the medium term, so many instruments are showing almost the same dynamics. At the moment, wave 4 is presumably complete. If this is indeed the case, the instrument’s growth will continue within impulse wave 5. Wave 4 could take on a five-wave form, but this is not the most likely scenario.
It should be remembered that at present much in the currency market depends on Donald Trump’s policies — not only trade-related ones. From time to time, positive news comes out of America; however, the market keeps in mind the ongoing uncertainty in the economy, Trump’s contradictory decisions and statements, and the hostile, protectionist external stance of the White House. Global tensions are rising and, as I have already said, the main “culprit” remains the dollar. That is why it continues to take all the hits.
The GBP/USD rate continued to rise on Tuesday, as I had expected. I remind you that the corrective wave sequence is presumably complete. If this is the case, we are looking at a new bullish impulse phase of the trend. Therefore, the movement we see now is completely logical.
Today, the pound received strong support from all of the day’s reports. In the morning, the UK released unemployment and wage data, which turned out to be fairly positive. The unemployment rate remained unchanged (which is good given the trend of the past year), the number of unemployed decreased (the market had expected an increase), and wages matched market expectations. Even though the support was not large, it still helped the pound.
In the second half of the day, the U.S. Consumer Price Index was published, which, as I have already written, had almost no impact on the Fed’s upcoming decision. However, it did affect monetary policy outlooks. If inflation had accelerated, the market could have assumed that the Fed would cut rates once or twice and then pause to see how the labor market reacts. However, inflation did not accelerate, meaning it remains low (at least in Donald Trump’s view). This means pressure on the Fed will persist, and with each passing month, Trump’s position on inflation will appear more convincing and confident.
At the moment, the market still does not believe that trade tariffs will not cause a sharp increase in prices. Trump and his supporters think otherwise. Every new month without a strong acceleration in price growth will confirm Trump’s position rather than Powell’s. The flow of criticism toward the FOMC Chair will intensify, and easing monetary policy will still be necessary to support the labor market. Therefore, at this point, it can be assumed that the Fed will cut rates three times this year — at each of the remaining meetings.
General conclusions
The wave picture for GBP/USD remains unchanged. We are dealing with a bullish impulse phase of the trend. Under Donald Trump, markets could face many more shocks and reversals, which could have a significant impact on the wave structure, but for now, the working scenario remains intact. The targets for the bullish phase are now near the 1.4017 level. At present, I assume that the formation of corrective wave 4 is complete. Therefore, I expect the upward wave sequence to continue and consider buying with a target of 1.4017.
Key principles of my analysis:
- Wave structures should be simple and clear. Complex structures are hard to trade and often change.
- If there is no confidence in the market situation, it is better to stay out.
- There can never be 100% certainty in market direction. Always use protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
