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The wave structure for GBP/USD continues to indicate the formation of a bullish impulse wave pattern. The wave pattern closely mirrors that of EUR/USD. Until February 28, we observed the construction of a convincing corrective structure with little doubt. However, demand for the U.S. dollar then began to decline sharply, resulting in a trend reversal. Wave 2 of this trend formed a single-wave structure. Within the assumed wave 3, sub-waves 1 and 2 have been built. Consequently, we should now expect a further rise in the pound within wave 3 of 3, which is what we are currently observing.
It's important to remember that at this time, much in the currency market depends on the policies of Donald Trump. Even positive news from America struggles to influence the market, as uncertainty in the economy, Trump's contradictory decisions, and the White House's hostile, protectionist stance are always in focus. Thus, the dollar faces significant headwinds in converting even positive developments into market demand.
On Monday, GBP/USD rose by 85 basis points only during the first half of the session. Clearly, the dollar's problem was not the UK's manufacturing PMI report. Once again, the issue lay with Donald Trump. Buoyed by the Appeals Court ruling last Thursday, Trump launched new attacks on former trade partners. First, he announced tariff hikes on steel and aluminum imports, striking at long-suffering Canada and other nations, including EU countries. Then, Trump claimed China had violated the terms of the Geneva agreement reached weeks ago. Market participants interpreted this as a signal for a new escalation of the global trade war, leading to a decline in demand for the U.S. dollar.
Therefore, much in the currency market this week will again depend on Trump and his decisions. I mention this in almost every article because it remains the primary factor shaping market sentiment. Ideally, economic reports or monetary policy should be more influential, but unfortunately, that's not the case right now. Thus, we must continue closely monitoring the words and actions of the U.S. president while keeping an eye on the economic data, of which there will be plenty this week. If U.S. economic data disappoints, demand for the dollar will decline even further. The wave structure remains clear, though its internal dynamics and length will again depend on Trump's actions.
The GBP/USD wave pattern has evolved. We are now dealing with a bullish, impulsive trend segment. Unfortunately, under Donald Trump, markets may continue to experience many shocks and reversals that don't align with wave patterns or any technical analysis. Nonetheless, the current scenario and wave structure remain intact. The construction of the upward wave 3 continues, with immediate targets at 1.3541 and 1.3714. Therefore, I continue to view buying as the preferred strategy, as the market shows no signs of reversing the trend yet again.
On the higher wave scale, the wave structure has transformed. We can now assume the development of a bullish trend phase, which currently appears incomplete and unfinished. Thus, further gains can be expected.
Key Principles of My Analysis:
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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