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The wave structure for GBP/USD continues to indicate the development of an upward impulsive wave pattern. The wave pattern is almost identical to that of the EUR/USD pair. Until February 28, we observed the formation of a convincing corrective structure, which left little room for doubt. However, demand for the U.S. dollar then began to drop sharply, culminating in a trend reversal to the upside. Wave 2 of this trend took on a single-wave form. Inside the assumed wave 3, waves 1 and 2 have been built. Therefore, we can now expect a new advance for the pound within wave 3 of 3 — and that is exactly what we are witnessing.
It's important to remember that much in the currency market right now depends on Donald Trump's policies. Even good news from the U.S. can't guarantee positive market reactions because the market constantly factors in economic uncertainty, Trump's contradictory decisions, and the White House's hostile and protectionist stance. Thus, the dollar has to work very hard to convert even positive news into increased demand.
The GBP/USD rate fell by 35 basis points on Tuesday, which is hardly a sign of dollar strength. The market still shows no inclination to boost demand for the dollar until U.S. trade policy becomes more accommodating and friendly. Should we expect such changes any time soon? In my view, no. Trump's latest statements have clearly demonstrated that the American president's hostile stance remains unchanged. No sooner had the ink dried on the Geneva agreements than Trump resumed his attacks on China, blaming it for all sorts of wrongdoings. Let me be clear: I am not defending China or its policies, nor am I suggesting that China is friendly toward the U.S. But Beijing adheres to internationally recognized rules: what is forbidden is forbidden; what is allowed is allowed.
Of course, there are issues like espionage or theft. But those are separate discussions, and Washington is hardly benevolent in such matters either. Thus, from the outside, Trump's accusations against China look baseless, and as history shows, such accusations typically escalate conflicts. This time, the U.S. president accused China of stealing technologies, threatened to impose new tariffs if countries do not stop buying Huawei chips, and even threatened to revoke visas for Chinese students in the U.S., claiming they "study here and then use the information against the U.S." Again, Trump may well be right, but he is disrupting the global order that has been in place for decades. The market doesn't like this — and it doesn't like "Trump's currency" either.
The wave structure for GBP/USD has transformed. We are now dealing with an upward, impulsive segment of the trend. Unfortunately, under Donald Trump, markets may experience many more shocks and reversals that do not conform to wave patterns or any form of technical analysis. However, at the moment, the working scenario and wave pattern remain intact. The formation of upward wave 3 continues, with the next targets at 1.3541 and 1.3714. Thus, I continue to consider buying opportunities, as the market shows no sign yet of reversing the trend.
On a larger wave scale, the wave pattern has also changed. We can now assume the construction of a bullish segment of the trend, which at this point does not appear complete. For now, we can only expect further gains.
The Main Principles of My Analysis:
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