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Let us start our technical journey with the GBP/USD pair asking ourselves this question? Is Cable correcting or creating a base for a huge upside recovery for the collapse that started at 2.1160 zones? The weekly chart below can answer this question, as we can see an obvious IM -impulsive- wave that started at the significant top of 2.1160 which was placed in November, 2007.
What bothered us during the past period after placing the bottom of 1.3500 –placed in January, 2009- was that long period which the pair has taken to achieve the recovery. Actually, this answers our inquiries since it reflects the nature of the fourth wave.
Having said so, we should know that defining 1.3500 to be the end of the bigger third wave suggests that, our weekly graph needs two more waves to complete the IM wave of our caught Elliott sequence. Thus, the internal structure of the movements from 1.3500 within three waves to 1.6615 zones might have created the bigger fourth wave.
Consequently, we classify the downside actions that started at 1.6615 until the current levels as the internal structure for the internal first wave of the bigger fifth wave. Note: The bigger fifth wave of the entire impulsive structure should consist of internal five waves.
Having a deeper look on the above graph will prove the importance of the classical factors where we have been capable of catching a diamond pattern -red lines- in the areas of the <!-- @page { margin: 0.79in } P { margin-bottom: 0.08in } --> internal "A" wave of the fourth wave and it resulted in a violent collapse from 1.7000 zones to 1.4200 areas.
Henceforth, we look at the current price behaviors as preparation for forming a new bearish classical pattern which is very close to be a complicated head and shoulders pattern with a neckline at the pivotal support areas of 1.5270 and a break of which will assist the pair to attack and breach the correctional uptrend line connecting 1.3500, 1.4200 and their extensions.
Before discussing the potential technical objectives of this bearish overview, we will pause with technical indicators to see what they tell according to the chart below.
We can notice a potential harmonic Butterfly pattern starting from X2 point; whilst staring the analysis from X1 point gives us a possible Bat pattern according to the Fibonacci rhythmic dominating the price behaviors after placing the bottom of 1.4225 in May 2010. This harmonic overview suggests a huge breakout below the neckline mentioned in the first part of our analysis; thus, we advice watching the price behaviors around our detected sensitive levels as the price behaviors around them will give us signals for the next step.
What bothered us during the past period after placing the bottom of 1.3500 –placed in January, 2009- was that long period which the pair has taken to achieve the recovery. Actually, this answers our inquiries since it reflects the nature of the fourth wave.
Having said so, we should know that defining 1.3500 to be the end of the bigger third wave suggests that, our weekly graph needs two more waves to complete the IM wave of our caught Elliott sequence. Thus, the internal structure of the movements from 1.3500 within three waves to 1.6615 zones might have created the bigger fourth wave.
Consequently, we classify the downside actions that started at 1.6615 until the current levels as the internal structure for the internal first wave of the bigger fifth wave. Note: The bigger fifth wave of the entire impulsive structure should consist of internal five waves.
Having a deeper look on the above graph will prove the importance of the classical factors where we have been capable of catching a diamond pattern -red lines- in the areas of the <!-- @page { margin: 0.79in } P { margin-bottom: 0.08in } --> internal "A" wave of the fourth wave and it resulted in a violent collapse from 1.7000 zones to 1.4200 areas.
Henceforth, we look at the current price behaviors as preparation for forming a new bearish classical pattern which is very close to be a complicated head and shoulders pattern with a neckline at the pivotal support areas of 1.5270 and a break of which will assist the pair to attack and breach the correctional uptrend line connecting 1.3500, 1.4200 and their extensions.
Before discussing the potential technical objectives of this bearish overview, we will pause with technical indicators to see what they tell according to the chart below.
- MACD traditional reflects the negativity dominating the price actions overlapping bearishly below zero level.
- Vortex -modern trend indicator- shows the strength of the bearishness despite the attempt to fix its negative sign.
- SMA 200 -blue line- is clearly acting as a ceiling for the pair as seen on the first graph.
Targets of the suggested fifth wave:
Commonly, the fifth wave travels beyond the third wave, while using Fibonacci projection for the length of the third wave suggests 1.1700 zones to be the possible target over long and medium term basis.
The soft technical objective of our analysis resides at 1.3500 in case of drawing a double bottom; whilst the technical obstacle reside around 1.4515 followed by 1.4420 and mainly 1.4225 zones. The aforementioned levels could represent potential reversal zones for a duplicated harmonic structure over same time interval as seen on the image below:
We can notice a potential harmonic Butterfly pattern starting from X2 point; whilst staring the analysis from X1 point gives us a possible Bat pattern according to the Fibonacci rhythmic dominating the price behaviors after placing the bottom of 1.4225 in May 2010. This harmonic overview suggests a huge breakout below the neckline mentioned in the first part of our analysis; thus, we advice watching the price behaviors around our detected sensitive levels as the price behaviors around them will give us signals for the next step.
Finally, areas between 1.6750 and 1.6875 should hold to protect our scenario.
