The section of the trend, which originates on September 23, took a five-wave fully equipped form. The internal wave structure of the proposed wave 5-5 does not look quite convincing and may require additions and adjustments, as well as the entire wave 5. Nevertheless, the upward trend section has long been nearing its end. At the same time, the demand for the British remains quite high. A successful attempt to break the previous high (about 37 figures) will lead to a new complication of the upward trend.
On the lower chart, wave marking has also undergone certain changes and may require adjustments. Within the upward wave 5, the wave structure can be complicated as many times as necessary. At the moment, it is quite possible to resume the increase in the quotes of the instrument within the wave 5-5-5. At the same time, the wave marking of the wave 5-5 does not look quite convincing. A delicate point, you need to be careful.
Yesterday, Silvana Tenreyro (a member of the Bank of England's monetary Committee) did not have time to finish her speech, in which she said that negative rates could more quickly return inflation to target levels, and the economy would be allowed to recover more quickly, as the Governor of the Bank of England, Andrew Bailey, also spoke, who said almost exactly the opposite. The governor said that negative rates themselves create many problems, the impact of the third wave of coronavirus on the economy is not yet clear, and the UK GDP in the fourth quarter will not change at best. However, in all this, the markets saw a "hawkish" message, and the British immediately soared up. The increase in the instrument's quotes ended near the peak of the previous wave. Now I'm waiting for either a breakout of this figure, as the wave pattern still doesn't look fully completed. It will be very difficult for the British to find new motives for promotion. Nevertheless, there have been few of them, in principle, in recent months. Thus, I would not be surprised if the markets find grounds for new purchases of the British currency.
Today, we should also pay attention to the US inflation report. It will be released in a couple of hours and the markets are waiting for this indicator to increase slightly. As long as inflation is below 2%, any increase in it is a positive factor. Thus, a value of 1.3% y/y or higher may cause a decrease in the instrument, that is, an increase in the quotes of the US currency. I also note that the European and the British are now poorly correlated with each other. If the British again tends to increase, the European - to decrease.
General conclusions and recommendations:
The pound/dollar instrument can resume the construction of an upward trend section at any time. Thus, I currently recommend buying the pound/dollar instrument in case of a successful attempt to break through the 127.2% Fibonacci level with targets located near the 40th figure, within the expected wave 5-5-5 of the upward trend section. An unsuccessful attempt to break through may lead to a new departure of quotes from the reached highs.
