Trade Idea: GBP/USD – Hold short entered at 1.2955

GBP/USD – 1.2859

Recent wave: Wave V of larger degree wave (III) has ended at 1.1986 and major correction has commenced from there for gain to 1.3000 and 1.3140-50

Trend: Near term up

Original strategy :

Sold at 1.2955, Target: 1.2775, Stop: 1.3000

Position: – Short at 1.2955
Target:  – 1.2775
Stop: – 1.3000

New strategy :

Hold short entered at 1.2955, Target: 1.2775, Stop: 1.2910

Position: – Short at 1.2955
Target:  – 1.2775
Stop:- 1.3000

Cable finally dropped below previous support at 1.2900-03 and has remained under pressure, adding credence to our view that top has been formed at 1.2991 last week and bearishness remains weakness to 1.2831 support, however, a break below this level is needed to add credence to this view, bring retracement of recent rise to 1.2770-75 but previous support at 1.2757 should hold from here. We are keeping our view that the wave c as well as larger degree wave B has ended at 1.2109, hence impulsive wave C has commenced from there with wave i of C ended at 1.2616, follow by a correction to 1.2365 (end of wave ii) and wave iii rally is unfolding.

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 ended at 1.7192, the subsequent selloff is the larger degree wave (C) which is still unfolding with minor wave (III) of larger degree wave 3 ended at 1.1986, hence wave (IV) correction is in progress which could either be a triangle wave (IV) of a complex formation but upside should be limited to 1.3500 and price should falter well below 1.4000, bring another decline in wave (V) of 3 for weakness to 1.1500, then 1.1200.

On the upside, expect recovery to be limited and previous support at 1.2903 (now resistance) should hold, bring another retreat later. Above 1.2950 would risk test of said resistance at 1.2991 but break there is needed to extend recent upmove to 1.3040-50 but overbought condition should limit upside to 1.3075-80 and price should falter below 1.3100.