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07.06.202317:59 Forex Analysis & Reviews: GBP/USD. Analysis for June 7th. Kristalina Georgieva expects further tightening from the Fed

Exchange Rates 07.06.2023 analysis

The wave pattern for the GBP/USD pair still looks complex and ambiguous. After a horizontal trend correction, I expected a similar downward movement. Still, the increase in quotes over the past two weeks suggests that the market is ready to build a full-fledged, upward trend impulse segment. The presumed wave 2 or b could have completed its formation last week (although I'm not yet convinced of that). If that is the case, forming an ascending wave 3 or c has already begun. This provides an excellent opportunity for the British pound to rise to 26-30 figures. Whether the current news background justifies, this is up to you to decide.

In this case, the wave pattern for the EUR/USD pair would significantly differ from that of GBP/USD. The euro is expected to form a descending wave set, and the hypothetical complexity of the upward trend segment is not on the agenda. However, everything indicates a new upward trend segment for the British pound. The news background for the pound sterling has remained largely unchanged recently, so I can't determine the exact reason behind the increased demand for the pound.

The pace of lending in the United States is decreasing slowly. The GBP/USD exchange rate increased by 65 basis points on Wednesday. The rise in demand for the British pound is driven by strong statistics from Britain (as the increase started in the morning), but that is not the case. This week, there have been only two reports on business activity in the UK, and there were no significant events on Wednesday. Nevertheless, the market has again increased demand, suggesting an upward trend segment. In this case, as I have mentioned before, the wave patterns for the euro and the pound may start to differ from each other, which is rare significantly. As for the news background, it is currently either neutral or "American." However, for some reason, the market continues to ignore this factor.

Today, IMF Managing Director Kristalina Georgieva stated that the pace of bank lending in the United States is slowing down relatively slowly (after the banking crisis), so the Federal Reserve should not abandon further tightening monetary policy. Georgieva also highlighted a strong labor market. "The pressure of unemployment and income growth remains at a very low level, which allows the Federal Reserve to continue raising interest rates," believes the President of the International Monetary Fund. My opinion coincides with Georgieva's; several FOMC members have previously expressed support for a rate hike in June. All this information can be considered "hawkish" or bullish for the US currency, but as we can see, demand for it is decreasing, which is quite strange.

Exchange Rates 07.06.2023 analysis

General conclusions.

The wave pattern for the GBP/USD pair has long suggested the formation of a descending wave. Wave b could be very deep, as all recent waves are approximately equal. However, the recent increase indicates a possible completion of this wave on May 25. In this case, the trending segment may transform into an upward trend. This would present a completely different wave pattern and different conclusions with recommendations. Therefore, I currently recommend selling the British pound with targets around 23 and 22 figures, but now we need to wait for signals of the resumption of the downward wave, which still needs to be present.

On a larger wave scale, the pattern is similar to the EUR/USD pair, but some differences remain. The descending correctional segment of the trend has ended, but the formation of a descending wave is currently ongoing. This wave could be deep and extensive, and the entire trending segment could be horizontal, similar to the previous one.

*Analisis pasar yang diposting disini dimaksudkan untuk meningkatkan pengetahuan Anda namun tidak untuk memberi instruksi trading.

Chin Zhao,
Analytical expert of InstaSpot
© 2007-2024
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