The wave structure on the GBP/USD chart has also shifted to a bullish, impulsive form — "thanks" to Donald Trump. The wave pattern is nearly identical to that of EUR/USD. Until February 28, we observed the development of a convincing corrective structure that raised no concerns. However, then demand for the US dollar began to decline sharply. The result was the formation of a five-wave upward structure. Wave 2 took the form of a single wave and is now complete. Therefore, we should expect a strong upward movement of the pound within wave 3 — a movement we've already been witnessing for more than a week.

Taking into account the fact that the UK news flow has had no impact on the strong rise of the pound, we can conclude that currency markets are being driven solely by Donald Trump. If (theoretically) Trump's trade policy stance changes, it's entirely possible that the trend will change too — this time to a downward one. Therefore, in the coming months (or possibly years), close attention should be paid to every action coming from the White House.

On Wednesday, the GBP/USD pair saw almost no change during the European session. Overnight, however, the pound first fell sharply and then rose just as strongly. These movements were triggered by contradictory statements from Trump, who initially fired Jerome Powell, only to then decide to keep him as Fed Chair. As a result, the market first sold the dollar, then bought it again — temporarily forgetting about the Trade War altogether.

This morning in the UK, PMI reports for the services and manufacturing sectors were released, but they had no real impact on market sentiment. Both indices slowed in April, with the services PMI falling from 52.5 to 48.9. Now both sectors are trending downward, and the UK economy will likely continue to slow. This data could have triggered a drop in demand for the pound — but to sell the pound, the market would have to buy the dollar. And right now, the dollar is like a red flag to a bull. No one wants to buy it, nor American stocks or bonds. A recession is forecast for the US economy — and while the same is likely true for the UK, the focus remains on Trump and the dollar.

It's worth noting that investors value stability — something the world's #1 economy can no longer boast. No one knows how the trade battles will end, which deals will be signed, or how China and the US will eventually come to terms. This lack of clarity discourages investors from buying the US dollar.

Final Thoughts

The wave structure of GBP/USD has shifted. We are now dealing with a bullish, impulsive trend segment. Unfortunately, with Donald Trump in charge, markets may experience many more shocks and reversals that defy wave analysis and any other form of technical forecasting. The presumed wave 2 is complete since prices have already surpassed the peak of wave 1. Therefore, wave 3 is in progress, with initial targets at 1.3345 and 1.3541. Of course, it would be ideal to see a corrective wave 2 within wave 3 — but that would require the dollar to rise and for that to happen, someone needs to start buying it.

On the higher wave scale, the structure has also shifted to bullish. We can now anticipate the development of an upward trend phase. The nearest targets: 1.2782 and 1.2650.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are harder to trade and are often subject to change.
2. If you're unsure of what's happening in the market, it's better to stay out.
3. There's never 100% certainty in market direction. Always use Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.