The wave pattern for GBP/USD continues to suggest the formation of an upward impulsive wave sequence. The wave pattern closely resembles that of EUR/USD, since the U.S. dollar remains the primary driver. Demand for the dollar is falling across the board, leading to similar dynamics in many instruments. Wave 2 of the upward trend segment took the form of a single wave. Within the assumed wave 3, waves 1, 2, 3, 4, and likely 5 have been completed. Therefore, this wave sequence appears finished, and the market is now transitioning into a corrective structure.

It is important to remember that much of what happens in the currency market now depends on Donald Trump's policies—not only trade-related ones. From time to time, decent economic news comes out of the U.S., but the market remains focused on the persistent uncertainty, Trump's contradictory statements and decisions, and the protectionist stance of the White House. As a result, even positive economic data may fail to boost demand for the dollar.

The GBP/USD rate fell by almost 200 basis points on Wednesday. Naturally, the question arises—what caused such a sharp move and strong appreciation of the U.S. currency? For several days, I've pointed out that the wave pattern of the latest upward trend segment has taken on a clear five-wave form. Based on wave theory alone, a corrective phase was expected. Yesterday, I expressed doubts about this outcome, which in hindsight were misplaced.

It's worth noting that the news flow had no real influence on the dollar's strength or the pound's decline. In the U.S., the only report published today was the ADP employment report, which turned negative for the first time in 2.5 years. Clearly, this report was not a trigger for increased demand for the U.S. dollar. Meanwhile, in the UK, the Treasury conducted several bond auctions this week, but no surprises occurred. The Treasury successfully issued 2028-maturity bonds at lower yields than before, which is a positive signal for the British economy and currency.

This week also featured several speeches by Bank of England Governor Andrew Bailey. However, his tone was extremely cautious and reserved. Mr. Bailey stated that interest rates would continue to gradually decline over time—but there's nothing unexpected or negative for the pound in that statement. The Bank of England began its monetary easing cycle last year and has already cut rates twice this year (unlike the Fed), and these moves have not caused any significant issues for the pound. In my view, the sole reason for today's sharp GBP/USD decline lies in the wave pattern.

Key Conclusions:

The wave pattern for GBP/USD remains unchanged. We are dealing with an upward impulsive segment of the trend. Under Donald Trump's leadership, markets may face further shocks and reversals, which could significantly affect the wave outlook, but for now, the working scenario remains intact. The targets for the upward segment are now around the 1.4017 level, which corresponds to 261.8% Fibonacci of the assumed global wave 2. However, these targets may be revised, as a corrective wave sequence appears to be forming. If this is indeed the case, the dollar could gain some short-term relief, and new long positions should be considered later.

Core principles of my analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often evolve unpredictably.
2. If you are uncertain about market conditions, it's better to stay out.
3. Absolute certainty in market direction is impossible. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.