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23.09.202418:18 Forex Analysis & Reviews: Analysis of GBP/USD on September 23. One Step Back, Two Steps Forward

Exchange Rates 23.09.2024 analysis

The wave structure of the GBP/USD pair remains complex and continues to grow increasingly intricate. For a time, the wave pattern appeared convincing, suggesting the formation of a downward series of waves with targets positioned below the 1.23 level. However, in practice, demand for the British pound continues to rise, disrupting any wave patterns. The market persistently builds long positions.

At present, I can only suggest a significant complication in the upward trend that began on April 22. Some of the corrective waves might be transferred to a smaller scale (substructure), increasing the number of higher-level upward waves. Assuming the current movement retains its impulsive nature, it implies that we are in a higher-level third wave that began forming on August 8. If this assumption holds true, it means we have already observed waves 1 and 2 within this structure. Consequently, there is substantial room for further growth in the pound.

Business Activity in the UK Was Disappointing

The GBP/USD rate rose by 15 points on Monday, again highlighting the inconsistency between the title of this paragraph and the first sentence. The Services PMI fell from 53.8 to 52.7 in September, while the Manufacturing PMI decreased from 52.5 to 51.5. In both cases, the market had expected more positive results. Therefore, the pound's decline in the first half of the day was justified. However, its subsequent strengthening once again raises questions.

Currently, numerous uncertainties prevail in the market. The demand for the euro and the pound continues to rise, and the market interprets the news in favor of any currency except the dollar—even obvious factors fail to strengthen the U.S. currency. Today serves as a prime example. Despite clearly weak statistics from the UK, the pound initially fell by 65 points but subsequently climbed by 85 points in the following hours. The market simply took a brief pause before initiating a new wave of pound buying. We observe a similar pattern with every report from the UK or the USA.

Occasionally, the pair corrects over several days, which in itself seems like a miracle. However, even these occurrences are becoming rare. The wave structure continues to become more complex, as the market struggles to establish even a standard three-wave correction. On one hand, the movement appears very straightforward—consistently upward—but on the other, it's incredibly challenging to comprehend. Today, we will be awaiting the U.S. PMI reports, but I suspect that we won't witness a significant rise in the dollar regardless. It's also not advisable to rely on wave analysis at the moment; we are currently observing the formation of the seventh wave in the ongoing upward section of the trend.

General Conclusions

The wave structure of the GBP/USD pair continues to grow more intricate. If the upward trend started on April 22, it has already taken on a five-wave form but could become significantly more extended. I still find selling the pair to be more appealing, but specific signals are required for confirmation. At present, I have no doubts that a new upward wave is forming. The nearest target for this wave is the 1.3440 level, which corresponds to the 127.2% Fibonacci retracement.

On a larger wave scale, the wave pattern has transformed. We can now assume the formation of a complex and extended upward corrective structure. Currently, it appears to be a three-wave structure, but it may evolve into a five-wave structure, which could take several more months, or even longer, to develop.

The Main Principles of My Analysis:

  1. Wave structures should be simple and clear. Complex structures are difficult to trade and often undergo changes.
  2. If you're uncertain about what's happening in the market, it's better not to enter.
  3. Absolute certainty in the market's direction is never possible. Always remember to use protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.

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