13.06.2024 04:19 PM
Analysis of GBP/USD pair on June 13th. The Fed meeting and the new growth of the British dollar

For the GBP/USD pair, the wave analysis remains quite complicated. A successful attempt to break through the 50.0% Fibonacci level in April indicated that the market was ready to build a downward wave of 3 or C. If this wave really continues its construction, then the wave pattern will become much simpler and the threat of complication of the wave analysis will disappear. However, in recent weeks, the pair has remained the same, which again makes us doubt the readiness of the market for sales.

In the current situation, my readers can still count on building wave 3 or c, the targets of which are located below the low of wave 1 or a, the mark of 1.2035. Consequently, the British dollar should decline by at least 700-800 more base points from current levels. With such a decrease, wave 3 or c will turn out to be relatively small, so I expect a much larger drop in quotes. It may take a lot of time to build the entire wave 3 or c. Wave 2 or b has been under construction for 5 months, and this is only a corrective wave. Building a pulse wave can take even longer. The last corrective wave turned out to be very long, and it still could not complete its construction, jeopardizing the entire wave layout.

The market does not see anything positive for the dollar.

The exchange rate of the GBP/USD pair remained virtually unchanged on Thursday. But the last 24 hours in the foreign exchange market have been like a storm that began in broad daylight and with complete calm. Forecasts at the same time indicated sunny weather. Let's start with the inflation report, which caused a sharp decline in demand for the American currency. Inflation slowed from 3.4% to 3.3% YoY. In my opinion, such a slowdown does not open up any "dovish" prospects for the Fed. I talked about this yesterday.

A little later, Jerome Powell confirmed my words, saying that it would take much longer for inflation to return to the target level. He assured that the transition to a more "dovish" policy would not take place in the near future, and the FOMC committee changed its expectations for the year-end rate to 5.13%. Therefore, in the best case, the Fed will cut the rate twice this year and, in the worst case, once. But even this kind of information helped the US currency very little. If the market is panicking out of the dollar on a very mediocre report, and a very important event, it slightly increases demand for it, then no news background will help. Today, the market began to finish off the dollar on the PPI index, which also slowed down minimally, but the market, as it turned out, did not expect anything like this. Indeed, how can we expect inflation to slow down when the Fed remains hawkish? In general, the GBP/USD pair continues to rise because market expectations now have nothing to do with reality.

General conclusions.

The wave pattern of the GBP/USD pair still suggests a decline. At the moment, I am still considering selling the pair with targets located below 1.2039, as wave 3 or c has not yet been canceled. Since the pair is trying to form a reversal near the 1.2822 mark, as well as near the peak of the expected wave 2 or b, then the sale of the pair can be considered with the first targets located near the 1.2315 mark. But very carefully, as the market is extremely reluctant to increase demand for the US currency.

At the higher wave scale, the wave pattern is even more eloquent. The downward correction section of the trend continues to build, and its second wave has acquired an extended appearance – by 76.4% of the first wave. An unsuccessful attempt to break through this mark could lead to the beginning of building 3 or c, but a corrective wave is currently being built.

The basic principles of my analysis:

1) Wave structures should be simple and understandable. Complex structures are difficult to play out; they often bring changes.

2) If you are not sure what is happening in the market, it is better to avoid entering it.

3) There is no absolute certainty in the direction of movement, and there can never be. Remember about Stop Loss protection orders.

4) Wave analysis can be combined with other types of analysis and trading strategies.

Chin Zhao,
Analytical expert of InstaForex
© 2007-2024
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