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06.05.202401:13 Forex Analysis & Reviews: What to expect for the pound next week?

Exchange Rates 06.05.2024 analysis

The British currency has been in a splendid mood lately. Despite the lack of significant reports in the UK over the past two weeks, the US dollar came to the pound's aid. A whole series of important US reports turned out to be weaker than market expectations, which supported the instrument. The British currency rose to the 38.2% Fibonacci level and failed in its attempt a breakthrough. This attempt gives hope for the end of the upward movement, which can be interpreted as an internal corrective wave within wave 3 or from the downward trend segment. Therefore, the wave layout is still intact. However, if the UK reports continue to disappoint, demand for the British currency may continue to rise, breaking the current wave pattern.

The results of the Federal Reserve meeting could have triggered increased demand for the US currency. In my opinion, Fed Chief Jerome Powell's comments that he doesn't know when the process of monetary policy easing will begin says a lot. In other words, if the Fed previously hinted at approximate timings for the start of the easing program, now it indicates uncertainty regarding the timing. If Fed officials previously shared their opinions on how many rounds of rate cuts could be expected in 2024-2025, now Powell suggests that the rate may not change at all this year. Powell is not ready to consider raising rates in response to rising inflation. However, I believe that if inflation continues to rise, Powell will become even more hawkish.

Exchange Rates 06.05.2024 analysis

The UK will release reports on industrial production and GDP, and the Bank of England will also hold a meeting. GDP in the first quarter may grow by 0.2-0.4%, which could support demand for the pound, as the last two quarters showed negative dynamics. The BoE's interest rate will not change as there are no inflationary grounds for it. The central bank will have more time if GDP in the first quarter grows. The policymakers' voting on the rate will be quite important, as well as the speech by BoE Governor Andrew Bailey. If the number of policymakers supporting policy easing increases to 2-3 or more, this could exert a lot of pressure on the pound. This is exactly what is required for the current wave pattern, but I don't think the Bank's policymakers will vote for a rate cut.

Wave analysis for EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that a bearish wave set is being formed. Waves 2 or b and 2 in 3 or c are complete, so in the near future, I expect an impulsive downward wave 3 in 3 or c to form with a significant decline in the instrument. I am considering short positions with targets near the 1.0462 mark, as the news background works in the dollar's favor. A successful attempt to break 1.0637, which is equal to 100.0% Fibonacci, will indicate that the market is ready for new short positions.

Exchange Rates 06.05.2024 analysis

Wave analysis for GBP/USD:

The wave pattern of the GBP/USD instrument suggests a decline. I am considering selling the instrument with targets below the 1.2039 level, because I believe that wave 3 or c has started to form. A successful attempt to break 1.2472, which corresponds to 50.0% Fibonacci, indicates that the market is ready to build a descending wave.

Key principles of my analysis:

Wave structures should be simple and understandable. Complex structures are difficult to work with, and they often bring changes.

If you are not confident about the market's movement, it would be better not to enter it.

We cannot guarantee the direction of movement. Don't forget about Stop Loss orders.

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

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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