The British pound started the new week with a significant decline, confirming the market's desire to continue building a downward wave set that began on May 11. The wave patterns for the euro and the pound differ slightly, but in both cases, they suggest a decline. Therefore, the initial probability of a GBP/USD decline was higher.

I also mentioned earlier that single corrective waves do occur, but they are usually rare. Therefore, it is unlikely that the pound's decline ended on May 18. Geopolitics continues to push market participants toward buying the US dollar, as Iran does not confirm the existence of agreements with the US and continues to insist on its right to nuclear development and uranium enrichment. Therefore, Tehran and Washington may agree on all other issues, but one key aspect will prevent them from reaching a full deal. No deal means no peace and no de-blockade of the Strait of Hormuz.

As I mentioned before, the Strait of Hormuz is a means of pressure for Iran, not only on the US but on the entire world, specifically, even personally on Donald Trump. The longer the Strait remains blocked, the lower Trump's political ratings fall, and the lower the chances of his party winning the midterm elections in November 2026. Iran knows how to live and survive under sanctions. Thus, it can be said that time is working in Iran's favor, not Trump's. Iran will not open the Strait of Hormuz unless it is confident that it will receive a deal that fully satisfies it. Perhaps before Trump's military intervention, Tehran would have been more amenable, but now there is no sense in that. The war is already ongoing. Since Washington does not intend to abandon its goal of denuclearizing Iran, the likelihood of a deal approaches zero, increasing demand for the US currency.

This week, there are no scheduled economic events in the UK. However, the US has several events planned. Therefore, for the past several weeks, geopolitical factors have been the key influence on the currency market, supported by American reporting. Notably, the unemployment and labor market reports will be released on Friday. For the dollar to continue strengthening in the context of the current wave structure, strong US data is needed, as well as poor geopolitical news. There are currently no issues with the latter, but the report is slightly more complicated.

Wave Pattern for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument remains within an upward section of the trend and, in the short term, within a corrective structure. Currently, we may observe the formation of wave 5, which could be part of wave C. The entire wave C (if the current wave analysis is correct) could complete its formation much below the 14 level. However, such a strong decline in the instrument would require support from the geopolitical landscape. Otherwise, the downward wave set may take on a truncated form (a-b-c) and complete its formation slightly below the 16 level.

Wave Pattern for GBP/USD:

The wave pattern of the GBP/USD instrument has become clearer over time. I expect the formation of a downward wave set, which could take on an impulsive form and match the impulsive structure of the EUR/USD instrument. However, even if the GBP/USD instrument forms a series of waves a-b-c, and the EUR/USD instrument forms a complete five-wave structure, this scenario implies a decline for both the euro and the pound. Since single corrective waves are rare, I believe that the British pound will form wave 3 or c. In this case, the instrument is likely to fall below the 33 level. The euro will also decline in this scenario.

Fundamental Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often lead to changes.
2. If there is market uncertainty, it is better not to enter.
3. There is never 100% certainty in the direction of movement. Always remember to use stop-loss protective orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.