The wave pattern for the pound/dollar pair now appears very confusing but does not call for any clarifications. The wave patterns for the euro and the pound differ somewhat, but both point to a decrease. Our five-wave upward trend section has the pattern a-b-c-d-e and is most likely already finished. I anticipate that the downward part of the trend has started to take form; it will at least have three waves. Wave b appeared to be unnecessarily long, but it did not cancel. As a result, last week, a wave could have started to form with a downward section of the trend, the targets of which are situated below wave a's low. In other words, at least 200–300 points less than the current value. The entire downward section of the trend may even take a five-wave structure, in my opinion, and wave c may prove to be deeper than expected. But it's too early to discuss it at this time. The pair has been on the verge of restarting the development of an upward trend section for a while, and it wasn't until last week that it was able to start moving quotes away from the peaks reached with the help of news background.
An empty Monday does not prevent sellers from selling.
On Friday, the pound/dollar exchange rate decreased by 175 basis points. Its loss of more than 300 points in just two days might be regarded as a significant decline. However, I have forewarned numerous times that I believe a downward wave will develop. The nature of the news background and the forecast of wave analysis finally coincided after last week, which considerably helped the wave pattern. It hasn't altered or gotten more complicated, which is excellent news considering that my first hypotheses proved to be accurate. As a result, it was necessary to anticipate and resolve the fall in quotes. Of course, the market's attitude was impacted by US news on the labor market and unemployment, which on Friday started to boost demand for the dollar even more. In the absence of such strong news support, the pair may have quickly returned to its peak levels. But the outcome was different.
On Monday, the context of the news was nonexistent. In the United Kingdom, the index of economic activity in the construction sector declined by 0.4 points today, remaining below the crucial mark of 50.0. There was no way that the British pound could have received support from this report. It actually had no effect either, as it turned out. There won't be many significant and fascinating happenings this week, so there is no use in waiting for the pound to be helpful. On Friday, when the UK releases its GDP figure for the fourth quarter, that may be the lone exception. Contrary to all forecasts, the economy might once more show a modest improvement or at least avoid declining. Even if this report is positive, I do not believe that it will significantly benefit the British pound. Central bank interest rates are still at their initial levels. Since inflation is still high, the market is still waiting for a decisive increase from the Bank of England, but confidence in it is gradually weakening. It could also weaken the British pound.
Conclusions in general
The development of a downward trend section is implied by the wave pattern of the pound/dollar pair. Currently, sales with targets at the level of Fibonacci levels of 1.1508 (50.0%) might be taken into account. You can set a stop loss order above the peaks of waves e and b. Everything now depends on the decisions made by the Fed and the Bank of England in March, as well as on economic indicators, particularly those related to inflation. Wave c may take on a less extended form.
The picture resembles that of the euro/dollar pair at higher wave levels, but there are still some differences. The upward correction part of the trend has now been finished. If this presumption is true, 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.