The pound/dollar pair saw little movement on Monday, as the currency pair's Elliott Wave analysis suggests the unfolding of a complex yet clear pattern. We are observing the development of a new downtrend, marked by an elongated initial impulse wave. The corrective wave that followed also extended significantly, laying the groundwork for the anticipation of a complex third impulse wave.

There is ambiguity regarding the completion of the second wave or corrective wave b. This wave has become a five-wave structure, further complicated by the British pound's price surge this week. Our focus now shifts to identifying sub-waves within the current larger bullish corrective wave to gauge its potential culmination. Theoretically, this corrective wave b can extend up to 100% of the impulse wave a. Presently, corrective wave b exhibits a three-wave structure, which might suffice. A failed breach of the 1.2876 level, aligning with the 76.4% Fibonacci retracement, could signal the awaited end of this bullish correction.

Targets for the pair's descent in the presumed third impulse wave c lie beneath the 1.2039 threshold, the low of impulse wave a. Notably, Elliott Wave patterns may evolve unpredictably and not always correlate with market news. Despite this, I stick to my projection. However, the market remains bullish.

Final bull run?

The pound/dollar pair remained largely unchanged on Monday, with a modest 20 basis point dip. Meanwhile, the pair may plunge deeper today. Last week, the British pound surged higher than expected, considering the fundamental backdrop. Such an increase was too considerable. Therefore, I expect the pound to sag.

At the same time, US economic reports, misinterpreted by the market, may disrupt the current wave pattern. Tomorrow's inflation report could impact the analysis. Nonetheless, the UK will also release key economic data tomorrow, including Average Earnings Index, Unemployment Rate, and Claimant Count Change reports. While optimistic outcomes from the British economy are currently unlikely, the market continues to favor the pound sterling's bullish stance. This suggests that Tuesday could mirror today's market behavior with wave C completing at any moment. If the current Elliott Wave analysis is true, the pound is poised for a substantial downturn upon its completion. Otherwise, we may need to reassess the wave count.

The wage growth report stands out in the UK's economic data slate due to its direct implications on inflation rates. Should wage inflation persist, the Bank of England might maintain a hawkish stance for an extended period, providing further bullish momentum for the national currency.

Further Insights:

For additional analysis, see my commentary on the EUR/USD pair dated March 11, highlighting the impact of dual inflationary pressures on the euro's trajectory.

Conclusion:

The ongoing Elliott Wave pattern for the pound/dollar continues to suggest a bearish outlook. Currently, I advocate for positions targeting a descent below the 1.2039 mark, in anticipation of the eventual initiation of impulse wave 3 or c. Nevertheless, as long as corrective wave 2 or b remains uncompleted, an uptrend towards the 1.3140 level, equivalent to the 100.0% Fibonacci extension, remains intact. Plunging below the 1.2877 level, a 76.4% Fibonacci retracement, would confirm the market's readiness to sustain pound bullishness, warranting continued consideration for long positions.

The broader wave pattern resembles that seen in the euro/dollar pair, albeit with distinctions. The corrective trend segment's progression, with its second wave extending to 61.8% of the first wave, suggests an impending shift to impulse wave 3 or c, according to Elliott Wave principles.

Analysis Principles:

Wave structures should be straightforward and comprehensible, as complex configurations complicate trading and are subject to change.

Absence of market certainty warrants caution; refrain from engaging without confidence.

Absolute certainty in market direction is unattainable; always employ Stop Loss orders for protection.

Elliott Wave analysis complements other analytical methods and trading strategies, offering a multifaceted approach to market dynamics.