The wave pattern for GBP/USD still indicates the formation of an upward wave pattern, although in recent weeks it has become complex and ambiguous. The pound has fallen too sharply, making the uptrend that began on August 1 look unclear. The first thought that comes to mind is a complication of the presumed wave 4, which may take a three-wave form, with each of its sub-waves also subdividing into three smaller waves. In this case, a decline toward the 1.31 and 1.30 levels could be expected.

However, the downward wave pattern that began on September 17 has already taken the shape of a three-wave structure. From here, it could either evolve into a five-wave formation or transition into the start of a new upward wave sequence. In any case, I expect only growth in quotes, regardless of the wave structure. In my opinion, the fundamental background is now so one-sided that no other outcome seems likely. However, in recent weeks, buyers have shown no initiative.

At the moment, much on the currency market depends on Donald Trump's policies. The market fears potential Fed policy easing due to labor market weakness and Trump's pressure on the central bank. At the same time, Trump continues to introduce new tariff packages, indicating the continuation of the global trade war. As a result, the news background remains unfavorable for the U.S. dollar.

The GBP/USD rate declined slightly on Tuesday, but once again with extremely low volatility. Similar to EUR/USD, we observed another three-wave corrective structure, suggesting that the market may now be building a new upward sequence. Presumably, the first wave of this sequence has already formed, and the second wave is currently unfolding.

Tomorrow morning, the U.K. inflation report will be released — data that could wake the market up. Economists expect the Consumer Price Index (CPI) to rise to 4%, confirming the overall trend of acceleration that the Bank of England (BoE) continues to downplay. It's worth recalling that some BoE policymakers believe inflation will neither increase further nor remain persistently high. However, the actual figures show quite a different picture.

At the beginning of the year, BoE Governor Andrew Bailey warned of the possibility of faster price growth. As we can now see, Mr. Bailey was right. The question is — what to do with this level of inflation? Tomorrow's data could show inflation hitting 4%, which is twice the Bank of England's target. In my view, such a figure will prevent the BoE from launching another round of monetary easing before the end of this year. If this assumption proves correct, the market gains another strong reason to buy the pound, especially since next week the Federal Reserve is 99% likely to cut interest rates for the second consecutive time.

General Conclusions

The wave picture for GBP/USD has evolved. We are still dealing with an upward impulsive segment of the trend, but its internal wave structure is becoming more complex. Wave 4 is taking on a three-wave form, and its structure is much longer than that of wave 2. The latest three-wave decline appears to be complete. If that is indeed the case, then the pair's upward movement within the global wave structure could continue, with initial targets near 1.38 and 1.40.

The larger-scale wave pattern looks almost perfect, even though wave 4 slightly exceeded the top of wave 1. However, let's remember that perfect wave structures exist only in textbooks—in practice, things are far more complex. At the moment, I see no reason to consider alternative scenarios to the bullish segment of the trend.

Key Principles of My Analysis

1. Wave structures should be simple and clear. Complex patterns are difficult to trade and often lead to changes.
2. If you are uncertain about market behavior, it's better to stay out.
3. There can never be 100% certainty about the direction of movement. Always use Stop Loss orders for protection.
4. Wave analysis can and should be combined with other forms of analysis and trading strategies.