Fundamental analysis

GBP/USD analysis on October 27. The American economy is growing and responding to fears of a recession

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For the pound/dollar instrument, the wave marking looks quite complicated at the moment, but still does not require any clarifications. We have a supposedly completed downward trend segment, which consists of five waves a-b-c-d-e. If this is indeed the case, then the construction of a new upward trend section has begun. Its first and second waves are presumably completed, and the third wave is being built, which can be both 3 and C. Since the European wave marking has changed, now both wave markings coincide. As I have already said, the entire upward structure can be limited to only three waves. In this case, the completion of the third wave may occur at any time, after which the construction of a new downward trend section may begin, since the peak of this wave is already above the peak of the first wave. And if this wave is c, and not 3, then it should not be extended, just a small approach above the last peak is enough. Thus, we finally managed to sort out the wave markings, which have recently left many unanswered questions, but there are still huge doubts that the demand for the British will grow for a long time now.

The British pound copies the euro in everything

The exchange rate of the pound/dollar instrument decreased by 70 basis points on October 27 and exactly repeated the movements of the euro/dollar instrument. Let me remind you that it is not uncommon for the euro and the pound to show the same amplitude and direction. Today, the results of the ECB meeting were summed up, which should have had a greater impact on the euro currency. The euro eventually fell and with it the British pound. However, at the moment, I cannot say that the supposed wave 3 for the pound is completed. It has taken a three-wave form but has an excellent opportunity to get much longer than it is now. In any case, I expect that in the future both instruments will trade approximately the same.

A whole package of important statistics has been released in the USA today. In first place in importance was the GDP report for the third quarter. Traders’ expectations equaled an increase of 2.5% q/q, but the US economy showed growth of 2.6% after two failed quarters. This factor could also increase the demand for the US currency, but it began to grow at night, so I still think that the market was primarily based on the ECB meeting and its results. Since the British and European have been growing in the last few days, the results of the meeting could be played in advance. Therefore, today we received a reduction of both instruments quite reasonably. If the price increase does not resume in the near future, then we may well see the completion of the construction of an upward correction section of the trend, which will take the three-wave form a-b-c.

Now the market will focus on the meetings of the Fed and the Bank of England, for which, let me remind you, rates are also expected to rise by 75 basis points. And these decisions of central banks can also be won back by the market in advance. Therefore, next week we may again observe movements that are not entirely explicable, which will become clear after both banks announce the results of their meetings.

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General conclusions

The wave pattern of the pound/dollar instrument assumes the construction of a new upward trend segment. Thus, now I advise buying the instrument on the MACD reversals “up” with targets located near the estimated mark of 1,1705, which equates to 161.8% Fibonacci. You should buy cautiously, as the downward section of the trend may resume its construction.

At the higher wave scale, the picture is very similar to the euro/dollar instrument. The same ascending wave that does not fit the current wave pattern, the same five waves down after it. The downward section of the trend can turn out to be almost any length, but it may already be completed.

The material has been provided by InstaForex Company – www.instaforex.com


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