Forex Analysis & Reviews: 01.05.2025 - GBP/USD Analysis on May 1,...

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01.05.2025 06:56 PM

GBP/USD Analysis on May 1, 2025

The wave pattern for GBP/USD has also transformed into a bullish, impulsive structure—"thanks" to Donald Trump. The wave pattern is almost identical to that of EUR/USD. Until February 28, we were observing the construction of a convincing corrective structure that raised no concerns. However, after that, demand for the U.S. dollar began to decline rapidly. As a result, a bullish five-wave structure was formed. Wave 2 took on a single-wave form and is now complete. Accordingly, we should expect a strong increase in the pound within wave 3, which has already been underway for three weeks.

Taking into account that the news background from the UK had no influence whatsoever on the pound's sharp rise, we can conclude that Donald Trump alone is currently steering the currency markets. If (theoretically) Trump changes his own trade policy course, the trend could reverse—this time to a bearish one. Therefore, in the coming months (or even years), we should carefully monitor every move coming from the White House.

The GBP/USD rate changed very little in the first half of Thursday. Despite the pair's decline earlier in the week, I cannot even confirm the formation of a downward corrective wave within wave 2. Wave 2 already stretches across 750 basis points upward, yet the pair still cannot pull back even 38.2%. In my view, the pound's upward movement may resume even without a clear corrective wave. Don't forget that tomorrow key U.S. reports on wages, unemployment, and the labor market will be released. While market participants in recent months have been indifferent to routine statistics, these are critical reports for the U.S. economy.

Even the GDP report is less important than the Nonfarm Payrolls and unemployment data. Recall that the Fed primarily evaluates employment levels and inflation. If unemployment is rising and the labor market is cooling, it's a reason to cut rates to stimulate the economy. If inflation is rising, it's a reason to hold rates to put pressure on consumer prices. However, in the current situation, the Fed may find itself powerless—either employment or inflation will have to be sacrificed.

Donald Trump has created economic conditions in the U.S. where inflation may rise, the economy may shrink, the labor market may cool, and unemployment may increase. And how, one might ask, is the Fed supposed to solve all four of these puzzles with a single tool? Most importantly, due to Trump's actions, the dollar is losing its status as the world's reserve currency. For over a decade and a half, demand for the U.S. dollar had been steadily increasing because the American economy seemed stable and promising. Now, the U.S. bond market no longer attracts foreign investors, the economy is headed for recession, and Trump—toward impeachment.

General Conclusions

The wave pattern for GBP/USD has transformed. We are now dealing with a bullish, impulsive trend segment. Unfortunately, under Donald Trump, the markets may face many more shocks and reversals that do not align with wave patterns or any type of technical analysis. The presumed wave 2 is complete, as the price has moved beyond the peak of wave 1. Therefore, we should expect the construction of an upward wave 3, with near-term targets at 1.3541 and 1.3714. Of course, it would be ideal to see a corrective wave 2 within 3, but that would require the dollar to strengthen and someone would have to want to buy it for that to happen.

On the higher wave scale, the wave pattern has also transformed. We can now anticipate the formation of a bullish trend segment. The nearest targets are 1.2782 and 1.2650.

Core Principles of My Analysis:

Wave structures should be simple and clear. Complex structures are difficult to trade and often change.
If you're not confident about what's happening in the market, it's better to stay out.
There is never—and can never be—100% certainty about price direction. Don't forget about stop-loss orders.
Wave analysis can be combined with other types of analysis and trading strategies.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.