GBP/USD Elliott Wave: Chopping lower in temporary decline
|Executive summary
- GBP/USD finished the first wave of a larger third wave.
- Current decline is viewed as wave (ii) of ((i)) of 3.
- The forecast is bullish while holding above 1.3010.
Back on November 13, while trading at 1.3190, we forecasted a major low and large rally for GBP/USD that may extend to 1.48. Cable, so far, has reached a high of 1.3567 and the pattern we are following appears incomplete.
GBP/USD Elliott Wave count
GBP/USD appears to have completed wave 2 at the 1.3010 low on November 5. We know from our Elliott wave studies that this suggests a wave 3 rally. Wave 3 tends to have a similar size or Fibonacci proportions to the wave 1, or 2025 rally.
Using the Fibonacci extension tool, this projects a 100% wave 3 rally at 1.48.
But first, GBP/USD appears to be correcting lower within a smaller degree wave (ii). This wave (ii) decline has met the minimum expectations at the 23.6% Fibonacci retracement level. However, more commonly, wave (ii) tends to retrace between 38.2% and 78.6%. This would yield a lower decline to 1.3125 – 1.3333.
Then, once wave (ii) is in place, GBP/USD would need to break above the price channel resistance near 1.3650.
Bottom line
GBP/USD appears to be correcting lower in a smaller degree wave (ii). We suspect this decline may halt near 1.3125 – 1.3333 and lead to a large wave 3 rally that possibly reaches 1.48.
If the 1.3010 support low is broken, then wave ‘2’ is extending lower.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.