The wave counting for the GBP/USD currency pair still looks convincing, but it may require adjustments and additions soon. The third unsuccessful attempt to break through the 1.3873 mark led to the exit of quotes from the reached highs by 300 basis points, but wave c still does not look fully completed. However, given the strong decline of the instrument in recent weeks, other possible options should be considered. For example, wave c may take a shortened form and be considered complete. This happens infrequently, but wave structures can take almost any form.
Let me remind you that it is important for us that these structures are as clear as possible, and not as detailed as possible into subwaves. Based on this, the British pound has been building wave structures of an exclusively corrective type for almost a year. And any corrective structures often take a complex and hard-to-read form. Hence, there are problems with the interpretation of a particular movement. However, an unsuccessful attempt to break through the 38.2% Fibonacci level, and the low of the previous wave, give hope to the British pound to build a new upward wave and increase to the 40th figure and higher.
The exchange rate of the Pound/Dollar instrument increased by 100 basis points on Thursday. There were quite a lot of important events and reports for the pound. Indices of business activity in the UK were released. The PMI index for the manufacturing sector fell in September from 60.3 points to 56.3 points. The PMI index for the service sector sank from 55.0 points to 54.6 points. Enough reasons for the markets to continue selling the pound. However, instead, they began to buy, clearly expecting something from the Bank of England. What the markets expected became clear a little later, when the BoE reported the results of the meeting. The key rate and the volume of the economic stimulus program remained unchanged, but two members of the MPC have already voted in favor of tapering the asset purchase program.
The Monetary Policy Committee said that it would continue to closely monitor the labor market, unemployment, and inflation, but these were already "general phrases" that are heard at every meeting of any central bank. The main thing is that the members of the monetary committee are slowly changing their opinion into tapering the stimulus program. This means that the Fed and the BoE can simultaneously start this process at the end of this year.
The wave pattern may change in the coming days, but it remains the same for now. I still expect the construction of an upward wave, but the wave counting may undergo changes. Thus, I advise buying the instrument based on an unsuccessful attempt to break the low of the previous wave b and hope to build a third wave as part of the future c, whose targets are located above the 40th figure.
The upward section of the trend, which began its construction a couple of months ago, has taken a rather ambiguous form and has already been completed. A new upward section of the trend can get an extended form, its first wave exceeded the peaks of waves b and d, and wave c (assumed) turns out to be very extended. The chances of a new strong increase in quotes remain quite high.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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