The wave picture

The wave picture on the GBP/USD chart still looks rather complicated due to the deep correctional waves that form the downtrend. At the same time, it seems to provide valid signals. Supposedly, there are five minor waves of equal size inside the last wave C. However, my suggestion that wave C is completed has not been confirmed yet. The five-wave structure of wave C is proved by a break of the wave c low. However, all waves inside wave C and wave A are of almost the same sizes. If the price line goes below the wave c low, it would mean that wave e is about to be completed even without falling to Fibo 61.8%. So, we should be prepared for the completion of wave C. For the time being, I don't think wave C will develop further.

A slight rebound from recent lows is a good sign for the pound

On Thursday, November 11, the GBP/USD pair rose by 40 pips. It was not a fast increase, but still, the British currency showed some signs of recovery from this week's lows. This rebound may not only initiate a new upward wave but even develop into an upward trend. However, the wave structure of the bullish run may become complicated. The fundamental data published in recent months have hardly favored the US dollar. However, a large flow of important news can be interpreted in different ways. For example, the United Kingdom is on the edge of a trade conflict with the European Union that is sparked by the confrontation regarding the border between Ireland and Northern Ireland. Reportedly, Brexit can cost the UK about 4% of the GDP while the Covid crisis may eat up another 2% of the GDP. A trade war with the European Union may hit a hard blow on the British economy. It's been already a year since the UK left the union, but it still has not entered into any significant trade relations with major partners. The negotiations with the United States are put on hold while deals with Japan and Singapore are valued at just a couple of billion pounds which is a rather modest sum for the British eonomy. So, a trade war with the EU may have a devastating impact on the UK.

Conclusion

The current wave picture of GBP/USD looks rather convincing. It is inclined to the downside but not impulsive. The suggested wave e is likely to be completed soon, while MACD has formed an upward signal. Unless the quotes move too far from the lows, the next downward signal can open up a selling opportunity with targets located near 1.3270 which coincides with 61.8% Fibo. At the same time, if the quotes break 50% Fibo, then further development of wave e will be unlikely.

Bigger time frame

Starting from January 6, a downward trend began to unfold. It can be of any size and length. The suggested wave is about to be completed soon, but there has been no confirmation of it yet. It is also possible that the downward trend line may become longer, but there have been no signals of that as well.