The Cable has been on a very mysterious path since Jan 25 high. Are we yet to see another high or has a reversal set in already… and, if so, how is this reversal exactly unfolding?
Today’s analysis will discuss several Elliott Wave scenarios that could be playing out for the GBP/USD.
The chart above shows that a top might be in place ever since the Jan 25 high. In this case the subsequent price-action breaks down into the following:
The second chart above shows a very similar situation as in Secnario #1, but with some differences:
In the 3rd and final scenario above, I leave the possibility open for another high to be created before the long-term Cable correction is finally complete:
It is a very difficult situation and there are pros and cons for each scenario:
Scenario #1 fulfills wave rules very well and it is not uncommon to see such price convolution in the early stages of large-scale trend changes. However price was at peak momentum when it reached the Jan 25 high, which most often means wave 3 is completed, with wave 4 and 5 still to form. This has left the door open for another high (i.e. scenario #3). But the weakness with scenario #3 is that the alleged wave 4 is becoming ever more disproportionately large compared to the other waves of the swing which puts serious doubt into this idea. In addition, price-action during potential wave 4 broke even the 61.8% Fibonacci level (of a what would count as wave 3), which is also highly unusual. Scenario #2 has pretty much the same pros and cons as #Scenario 1 but its weakness is the sub-wave structure which is unusual and should generally be more like in scenario #1… 5-3-5-3-5.
I personally am leaning more towards scenario #1 because of the various weaknesses of scenario #3, but it is unfortunately still very hard to tell. In any case, the GBP should appreciate some more in the short-term, regardless of which wave count is correct… the big question mark is simply how high it can go. 1.4150 is a very critical level to watch out for.
All the best along your trading journey…