Elliott Wave Weekly

GBP/USD Elliott Wave Analysis

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GBP/USD – 1.2150

 
GBP/USD – Wave 4 is unfolding as an (A)-(B)-(C) and could have ended at 1.7192

 
As cable has recovered after falling to 1.2135 last week, suggesting minor consolidation above this level would be seen and corrective bounce to 1.2250-60 cannot be ruled out, however, still reckon resistance at 1.2301 would limit upside and bring another decline later. A break of said support at 1.2135 would extend the fall from 1.2706 to 1.2100, however, as broad outlook remains consolidative, reckon downside would be limited to 1.2040-50 and price should stay above recent low at 1.1986 and bring another rebound later. In the event sterling drops below said recent low, this would signal the major downtrend has finally resumed and extend weakness to 1.1900-10 and then 1.1850 but near term oversold condition should limit downside to 1.1800. 

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has possibly ended at 1.7192, below support at 1.4232 would add credence to this count, then further fall to 1.4000 level would follow but reckon downside would be limited to 1.3655 support and price should stay above previous support at 1.3500.

On the upside, whilst initial recovery to 1.2250-55 cannot be ruled out, reckon upside would be limited to 1.2300-05 and previous support at 1.2347 should turn into resistance and put a lid on cable. A daily close above another previous support at 1.2383 would abort and signal the fall from 1.2706 has ended instead, bring a stronger rebound to 1.2440-50 and possibly towards 1.2500 but price should falter well below resistance at 1.2570, bring further choppy trading later.
 
Recommendation: Sell at 1.2300 for 1.2100 with stop above 1.2400.


 
Longer term - Cable's rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver with wave (A) ended at 1.3500 (23 Jan 2009), wave (B) itself is labeled as A: 1.6733, triangle wave B: 1.4813 and wave C as well as top of wave (B) ended at 1.7192 (2014), hence the selloff from there is an impulsive wave (C) with wave I : 1.4566, wave II 1.5930, an extended wave III is unfolding and already exceeded our downside target at 1.3500 and 1.3000, hence weakness to 1.2500 and possibly 1.2000 cannot be ruled out, however, price should stay well above psychological level at 1.0000.

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Author: Action Forex
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