The wave analysis for the pound/dollar pair now appears rather complex, doesn't call for any clarifications, but starts to differ significantly from the analysis of the euro/dollar pair. Our five-wave upward trend section has the pattern a-b-c-d-e and is most likely already finished. Although the recent increase in the pair's quotes proved to be too powerful, wave b has developed into a form that is too long and is on the edge of cancellation. I assume that the downward section of the trend has started to form and will take at least a three-wave form. The current upward wave will cease to be regarded as wave b if the increase in quotes even somewhat persists, and the analysis for the entire wave will need to be adjusted. However, if the wave analysis is still accurate, I still anticipate the development of a falling wave, and the pair can decline by 500–600 basis points, up to a level of 1.1508, which corresponds to a 50.0% Fibonacci ratio. The validity of the current wave analysis is maintained because the peak of the proposed wave b does not yet surpass the peak of wave e.
The British pound could begin a long decline.
The pound/dollar exchange rate has been moving recently with horizontal dynamics. Since quotes remain close to the peaks of waves b and e, there is nothing to be said regarding changes in the exchange rate. Although wave b is about to be canceled, the market is still not in a rush to lower demand for the pair. It would be far more sensible and attractive to first develop three waves downward before beginning to develop a new upward trend section. Although the market does not now show any willingness to decrease demand for the pound or increase demand for the dollar, I do not completely rule out the start of the development of a downward wave c this week. It has no desire to participate in the preparation for the Fed or Bank of England meetings.
The British economy has been the topic of much discussion recently, and most analysts concur that 2023 will be a very challenging year for the UK. Higher taxes, weaker-than-inflation wage growth, and excessive inflation that the regulator is unable to control just yet. All of this should have prompted Andrew Bailey or other Bank of England members to make new, aggressive statements, but in practice, things can go the other way. A severe recession might be avoided by the regulator's decision. He can anticipate that as energy prices decline over time, inflation will also gradually decline. The markets are uneasy because no one knows for sure what monetary policy the regulator will follow in the first part of the year. Although I believe that rates will continue to rise, I also believe that the tone will gradually shift in favor of "dovish." The pair needs this precisely to create the required downward wave.
Conclusions in general
The development of a new downward trend section is predicated on the wave pattern of the pound/dollar pair. Currently, sales with targets at the level of 1.1508, or 50.0% Fibonacci, might be taken into account. You can set a stop-loss order above the peaks of waves e and b. The upward section of the trend is probably over; however, it might yet take a longer form than it does right now. However, you must exercise caution while making sales because the pound tends to rise.
The display is comparable to the euro/dollar pair at the higher wave scale, but differences still start to show. Currently, the upward correction portion of the trend is almost finished (or has already been completed). If this assumption is accurate, then we must wait for the development of a downward section to continue for at least three waves with the possibility of a decrease in the area of figure 15.