The wave analysis for the GBP/USD pair needs to be simplified and clarified. A successful attempt to break the 50.0% Fibonacci level in April indicated the market's readiness to form a downward wave 3 or c, but since then, we have seen only increases. If this wave resumes its formation, the wave structure will become much simpler, and the threat of a complicated wave pattern will disappear. However, in recent weeks, the pair has remained the same, which once again raises doubts about the market's readiness for selling.

In the current situation, my readers can still expect the formation of wave 3 or c, the targets of which are below the low of wave 1 or a, at the 1.2035 mark. Therefore, the pound should decline by at least another 700-800 basis points from current levels. With such a decline, wave 3 or c will be relatively small, so I expect a much larger decline in quotes. It may take a lot of time to build the entire wave 3 or c. Wave 2 or b lasted 5 months, and that was just a corrective wave. The last corrective wave was very lengthy, but the unsuccessful attempt to break above the 1.2822 mark again allows us to look down.

The pound shows signs of readiness for a downward wave.

The GBP/USD pair only declined by 20 basis points on Friday, but the total retreat from the last peak reached is already 230 points. And that's something. I remind you that in the last month, I have constantly been expecting the completion of the construction of the presumed wave 2 or b in 3 or c of the downtrend. Any corrective wave can be as large as 100% of the impulse wave, which is what happened with wave 2 or b. Therefore, I still expect a significant decline in the pound.

At the moment, quotes have declined to the 1.2627 level, which corresponds to 38.2% Fibonacci retracement. A successful attempt to break this level could confirm the transition to the construction of a downward wave. Today, the news background was not in favor of the pound, but it also did not strongly support the dollar. Retail sales volumes in the UK grew by 2.9%, significantly higher than market expectations. However, the manufacturing purchasing managers' index (PMI) was only 51.4 (slightly above expectations), and the services PMI fell to 51.2 (which the market did not expect at all). One report is neutral, one is weak, and one is strong. American reports were slightly better. Business activity in the services sector increased by 0.4 points in June and in the manufacturing sector by 0.3 points. The market expected weaker values. Therefore, the 20-point increase in the dollar on Friday is a logical result. However, the instrument now faces a much more important task - breaking the 1.2627 level.

General conclusions

The wave pattern of the GBP/USD instrument still suggests a decline. At the moment, I am still considering selling the pair with targets below the 1.2039 level, as I believe that wave 3 or c has yet to be canceled. Since the pair reversed around the 1.2822 level, as well as not far from the peak of the presumed wave 2 or b, selling the pair can be considered with initial targets around the 1.2315 level. But very cautiously, as it is still difficult to be sure of a market sentiment change to "bearish."

On the larger wave scale, the wave pattern is even more eloquent. The downtrend correction continues to develop, and its second wave has taken on an extensive form – at 76.4% of the first wave. An unsuccessful attempt to break this level could have led to the beginning of constructing wave 3 or c, but currently, a corrective wave is being formed.

The basic principles of my analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play with and often bring about changes.
2. If there is confidence in what is happening in the market, it is better to avoid entering it.
3. There is never and cannot be a hundred percent certainty about the direction of movement. Don't forget about stop-loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.