GBP/USD – 1.2850
GBP/USD – Wave 4 is unfolding as an (A)-(B)-(C) and could have ended at 1.7192
Cable continued finding decent demand just above 1.2500 level and has rallied above indicated previous resistance at 1.2706 as well as 1.2775, adding credence to our view that low has indeed been formed at 1.1986 and bullishness remains for the erratic rise from 1.1986 to bring retracement of medium term decline, hence further gain to 1.2910-20 and 1.2950-60 would be seen, however, reckon psychological resistance at 1.3000 would limit upside and price should falter below 1.3140-50 (38.2% Fibonacci retracement of 1.5018-1.1986).
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 downside, whilst initial pullback to previous resistance at 1.2775 cannot be ruled out, reckon another previous resistance at 1.2706 would turn into support and contain downside, bring another rise later. Below previous resistance at 1.2616 (tentatively wave i top) would abort and suggest top is possibly formed, risk weakness to 1.2550-60 but break of 1.2500 support is needed to provide confirmation.
Recommendation: Buy at 1.2750 for 1.2950 with stop below 1.2650.
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.