For the GBP/USD pair, the wave analysis remains quite complex. A successful attempt to break the Fibonacci level of 50.0% in April indicated the market's readiness to build a downward wave 3 or c. If this wave indeed continues to develop, the wave pattern will become much simpler, and the threat of complicating the wave analysis will disappear. However, in recent weeks, the decline in the pair has been completely absent, leading to renewed doubts about the market's readiness for sales.

In the current situation, my readers can still expect the formation of wave 3 or c, the targets of which are located below the low of wave 1 or a at 1.2035. Therefore, the pound should decline by at least another 600-700 basis points from current levels. With such a decline, wave 3 or c would be relatively small, so I expect a much larger drop in quotes. It may take a lot of time to build the entire wave 3 or c. Wave 2 or b lasted for 5 months, and that was just a corrective wave. Building an impulse wave may take even more time. The last corrective wave turned out to be very prolonged, and it still cannot complete its formation, threatening the entire wave analysis.

A One-Time Dollar Action or a New Trend?

The GBP/USD pair declined by 65 basis points throughout Friday, which isn't that much. By the end of the day, the pair may drop even further, but that still won't be enough to conclude a transition to building a new downtrend wave. The market still regards the American currency as unfriendly, and I am surprised by today's decline. In addition to the Nonfarm Payrolls and wage reports, another important indicator was published – the unemployment rate. And the unemployment rate rose to 4.0%, although the market expected it to remain at 3.9%. This is bad news for the dollar. In a few hours, the market may take this indicator into account, which could calmly trigger the recovery of the pound. Therefore, it is still too early to draw any conclusions. While I can say about the euro that the downtrend is starting, there are big doubts about the pound.

For the GBP/USD pair, the important level now is 1.2822. As long as the pair remains below it, there are at least theoretical chances of resuming the formation of the downtrend section of the trend and maintaining the current wave structure. A successful attempt to break this level will almost 100% cancel the current working scenario. In this case, the wave pattern will not just transform into an upward trend segment. It may become even more tangled.

General Conclusions

The wave pattern of the GBP/USD pair still suggests a decline. At the moment, I am still considering selling the pair with targets below 1.2039, as I believe that wave 3 or c has yet to be canceled. Since the pair is trying to form a reversal around 1.2822 and not far from the peak of the presumed wave 2 or b, selling the pair can be considered with initial targets around 1.2315. But very cautiously, as the market is extremely reluctant and rarely increases demand for the US currency.

The wave pattern is even more telling on a larger wave scale. The downward corrective section of the trend continues to develop, and its second wave has taken on an extended form—to 76.4% of the first wave. An unsuccessful attempt to break this level could have led to the beginning of the construction of 3 or c, but currently, a corrective wave is being formed.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play out and often bring about changes.
2. If one lacks confidence in the market's performance, it's better not to enter it.
3. There is never 100% certainty about the direction of movement. Remember about protective Stop-Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.