The wave pattern for GBP/USD continues to indicate the formation of an upward wave structure, but in recent weeks, it has taken on a complex and ambiguous form. The pound has fallen too sharply, and as a result, the trend segment that began on August 1 now looks unclear.

The first idea that comes to mind is a complication of the presumed wave 4, which may take on a three-wave form, with each of its subwaves also consisting of three waves. In this case, we can expect the pair to decline toward the 1.31 and 1.30 levels.

However, the downward wave structure that began on September 17 has already formed a three-wave pattern. From here, there are two possibilities: either the structure extends into a five-wave pattern, or we see the formation of a new upward sequence. Naturally, I expect only an increase in quotations, regardless of the wave structure. In my view, the news background is currently so one-sided that no other outcome should be expected. Yet in recent weeks, buyers have shown no initiative whatsoever.

At the moment, much on the foreign exchange market depends on Donald Trump's policies. The market fears a Federal Reserve policy easing, driven by weak labor market data and pressure from Trump, while the president continues to introduce new tariff packages, signaling the continuation of the global trade war. Thus, the news background remains unfavorable for the U.S. dollar.

The GBP/USD rate rose by 25 basis points on Friday — the market's reaction to six major reports. The U.K. released data on business activity in the services and manufacturing sectors, as well as retail sales. Even without listing the figures, it is clear that all of them exceeded market expectations — yet the market did not react at all.

In the second half of the day, traders paid attention only to the U.S. Consumer Price Index (CPI), which came in 0.1% below expectations, at 3%. Because inflation rose more weakly than expected, demand for the dollar naturally fell, as the market is now 100% certain that the Fed will cut rates next week.

However, it seems that all other reports this week (and there weren't many) were simply thrown into the trash bin. For a long time, the dollar could do nothing against market sentiment, which consistently sold it off under the pressure of the news background. By late October, that background remains unchanged — but for some unexplained reason, selling has stopped.

Now, traders ignore both positive news for the pound and negative news for the dollar. The wave pattern remains unchanged in that it still implies the formation of an upward trend segment. Next week, the Fed will conduct a second consecutive round of monetary easing, but traders seem unconcerned. The government shutdown continues, and Trump's tariffs keep expanding and rising every month. Yet even these factors no longer interest the market in the second month of autumn.

General Conclusions

The wave picture of the GBP/USD pair has evolved. We are still dealing with an upward impulsive trend segment, but its internal wave structure is becoming increasingly complex. Wave 4 is taking on a three-wave form, with a structure several times longer than wave 2.

The latest downward three-wave structure appears to be complete. If that is indeed the case, the upward movement within the global wave structure may continue, with initial targets around the 1.38 and 1.40 levels.

The larger-scale wave pattern looks almost ideal, even though wave 4 slightly exceeds the high of wave 1. However, it's worth remembering that perfect wave patterns exist only in textbooks — in practice, things are far more complex. At this point, I see no reason to consider alternative scenarios to the upward trend segment.

Key Principles of My Analysis

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often undergo changes.
2. If there is uncertainty about the market situation, it's better not to enter.
3. Absolute certainty in market direction is impossible. Always use Stop Loss orders for protection.
4. Wave analysis can be combined with other analytical methods and trading strategies.