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30.10.2024 07:16 PM
Analysis of GBP/USD pair on October 30, 2024

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The GBP/USD wave structure remains complex and continues to develop. At one point, the wave pattern appeared convincing, suggesting the formation of a downward wave sequence with targets below the 1.2300 level. However, demand for the pound has risen so sharply that it disrupts any clear wave structure. Currently, there is a possibility of forming a new downward trend segment, but certain factors cast doubt on this, such as the ambiguous attempt to break the low of wave b within wave c.

Since April 22, a series of a-b-c waves have emerged, each containing its own a-b-c formation. Considering the wave structure of EUR/USD, which indicates a downward wave sequence, now seems like a favorable time to initiate a new trend segment. However, the pound remains influenced by the Bank of England, which is in no rush to lower rates. Recently, demand for the pound has decreased, which indicates a potential for a sustained downward wave sequence.

No signs of a corrective wave have appeared yet. Despite a 15 basis point drop in GBP/USD on Wednesday, demand for the British currency grew steadily during the U.S. session. In my view, this is a false rally for both the euro and the pound, as the market reacted to the "weak" U.S. GDP report while disregarding the strong ADP report. It's also too early to draw conclusions ahead of Thursday and Friday. Tomorrow, the Eurozone's inflation data for October will be released, which may support the euro and, in turn, the pound. Meanwhile, U.S. labor market and unemployment reports on Friday could strengthen the dollar, potentially driving both pairs down again.

Considering recent developments, I wouldn't make any final conclusions on the current wave structure until the end of the week. The overall market sentiment remains "bearish," with a downward wave sequence taking shape. News could potentially support both the pound and the dollar. In my view, a substantial decline in the pound may not start until later. The first wave appears convincing on the 4-hour chart but looks weak on the daily. Other waves are notably stronger and more prolonged, suggesting that the recent decline in the pound over the past month may not yet reflect the full extent of its decline.

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General Conclusions

The GBP/USD wave structure remains quite complex. The current pattern suggests that the trend segment from April 22 may have taken the form of an a-b-c wave sequence, which could now be complete. From the 1.3440 mark, aligning with the 127.2% Fibonacci level, one could cautiously open short positions. Currently, traders may wait for a corrective upward wave and then look to sell again, though the decline may continue within the first wave. The impulsive nature of this wave, indicating a rapid directional change, is becoming increasingly certain, and the pair may reach the 1.2800–1.2900 levels in the near term.

On a higher time frame, the wave structure has evolved. We might now anticipate a complex and prolonged upward corrective structure. Currently, it is forming a three-wave sequence, but it could expand into a five-wave structure, which could take several months or even longer to complete.

Key Principles of My Analysis:

  1. Wave structures should be simple and comprehensible. Complex structures are challenging to trade and often undergo changes.
  2. If there is uncertainty in the market's direction, it's better to avoid entering positions.
  3. One can never be 100% confident in the market's direction. Always remember to set protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
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