GBP/USD Elliott Wave: Cable finalizing its downtrend

Zorrays Junaid Alchemy Markets

Executive summary

GBP/USD in the final stages of a 2nd wave decline.
Bulls prevail while above 1.3175.
Targets are 1.37 and higher levels over the coming weeks.

Since topping at 1.3589 on April 14, GBP/USD has been grinding sideways to lower in an obvious corrective setback. We anticipate another dip is needed before the bulls are allowed to roam.

GBP/USD Elliott Wave count

The current Elliott wave pattern suggests GBP/USD is nearing the end of a corrective wave (ii). Once complete, GBPUSD would accelerate higher multiple hundred pips in wave (iii).

It appears GBPUSD carved a secondary bottom of 1.3305 last week. It was possible to consider that to be the end of a corrective wave (ii). However, the rally from the June 8 low has been choppy and overlapping, a sign of a corrective rally.

I’m viewing the high yesterday at 1.3461 is wave (y) of ((B)) of z of (ii). This means the current decline this week would be sub-micro wave ((c)) of z of (ii), an ending wave at multiple degrees of trend.

I’m anticipating this decline to develop in 5-waves, either an impulse or diagonal pattern.

A cluster of wave relationships appear between 1.3262 to 1.3286, just below the 1.3305 bottom from last week.

This wave count is valid so long as prices hold above the 1.3175 low from early April. If GBPUSD falls below 1.3175, then this decline is not wave (ii), but some other wave. We would reassess the wave count in the unexpected event of a decline below 1.3175.

Bottom line

GBP/USD appears to be falling in the final stages of a 2nd wave. After this, a strong 3rd wave rally may develop. These tend to be the strongest rallies of the 8-wave Elliott wave sequence. So long as GBP/USD holds above 1.3175, then a rally to 1.37 and higher levels is what the model forecasts. If 1.3175 is broken to the downside, then we’ll reconsider the wave count.

Author

Zorrays Junaid

Alchemy Markets

Zorrays Junaid has extensive combined experience in the financial markets as a portfolio manager and trading coach. More recently, he is an Analyst with Alchemy Markets, and has contributed to DailyFX and Elliott Wave Forecast in the past.

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