The wave counting for the Pound/Dollar instrument raises no less questions than for the Euro/Dollar instrument. The construction of the upward trend that had just begun was replaced by a sharp decline in the instrument quotes. Thus, now the last decline is identified as a new three-wave structure, or wave e. In any case, the wave counting becomes more complicated and confusing again. A new decline in quotes may not last long, so the pound can complete it already around the 38.2% Fibonacci mark, which corresponds to 1.3643. An unsuccessful attempt to break through this level will indicate that the markets are ready to buy the instrument.
At the same time, the news background may put pressure on the pound, as now mostly negative news comes from the UK. The pound lost about 100 basis points on Monday, although no economic reports were released. Consequently, the markets sell off the pound for other reasons. For example, due to the high number of COVID-19 cases in the UK or due to a possible new conflict between the EU and Britain.
The Pound/Dollar instrument has dropped 150 basis points over the past two days, although the news background of the economic plan was rather weak for it. On Friday, I can only highlight the US retail sales report, and on Monday, when most of the decline occurred, there was no economic data at all. Nevertheless, a fairly large amount of information is now coming from the UK. In particular, any quarantine restrictions have been completely canceled today, and the number of daily COVID infections is stable at about 50,000. Also today it became known that London is ready to go to a new conflict with the European Union over the Northern Ireland Protocol if it does not agree to certain concessions.
According to UK Minister David Frost, the Northern Ireland protocol is ineffective and requires revision. If Brussels does not agree on a voluntary basis to renegotiate its terms, London will be ready to unilaterally violate some of its provisions. However, the European Union itself has already officially announced that they are not going to revise the protocol. And this means that any violation of it will cause an appeal to the court by the European Union. Let me remind you that the EU has long been threatening to go to court, since, in its opinion, London has repeatedly violated the Northern Ireland protocol. At the moment, the case has not gone beyond threats, but if London continues to abuse the patience and loyalty of the European Union, then there can be no doubt that the case will really be considered in court.
At this time, the wave pattern remains very complex. The construction of the downward trend section has resumed and can continue for as long as necessary. But at the same time, the last downward wave can end at any moment, since it largely depends on the news background. Thus, I recommend selling the instrument after a successful attempt to break the 38.2% level, which equates to 1.3643.
The upward part of the trend, which began its construction a couple of months ago, has taken on a rather ambiguous form and has already been completed. However, the wave counting still looks rather difficult, as there is no impulse movement now. At this time, the construction of the downward part of the trend is also presumably completed, so we can expect a new increase in quotes to the maximum of wave e.
