  Understanding the origin of the pseudogap is an essential step towards
elucidating the pairing mechanism in the cuprate superconductors. Recently
there has been strong experimental evidence showing that C4 symmetry breaking
occurs on formation of the pseudogap. This form of symmetry breaking was
predicted by the Fluctuating Bond Model (FBM), an empirical model based on a
strong, local coupling of electrons to the square of the planar oxygen vibrator
amplitudes. In this paper we approach the FBM theory from a new direction,
starting from {\it ab initio} molecular dynamics simulations. The simulations
demonstrate a doping-dependent instability of the in-plane oxygens towards
displacement off the Cu-O-Cu bond axis. From these results and perturbation
theory we derive an improved and quantitative form of the Fluctuating Bond
Model. A mean field solution of the FBM leads to C4 symmetry breaking in the
oxygen vibrational amplitudes, and to a d-type pseudogap in the electronic
spectrum, the features linked by recent experimental data. The phase diagram of
the pseudogap derived from mean field theory, its doping- and
temperature-dependences, including the phase boundary T$^*$, agree well with
experimental data. We extend the theory to include the long range Coulomb
interaction on the same basis as the FBM interaction. When the long-range
Coulomb interaction is included in the FBM, a CDW instability in the charge
channel is predicted which explains the nanoscale, rather than spatially
uniform, behavior of the C4 symmetry-breaking. Taking the CDW into account,
with the theoretical k-dependence of the pseudogap, enables the Fermi Surface
arc phenomenon to be understood.
