Dear Traders,
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…
Hubert
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Hi, Thanks for your insightful post, you’ve said “However price was at peak momentum when it reached the Jan 25 high, which most often means wave 3 is completed” Would you please inform me what is your favorite momentum gauge? Are you using an indicator or just interpreting price action?
HI Ali, thank you for your comment. I use two indicators for momentum gauging. the Awesome Oscillator, which comes standard with MT4 platform plus the Fisher Oscillator which is more sensitive. This fisher is a custom indicator that comes with the ECS.SWAT course. If you are interested, please email Chris at ECS. Both indicators combined are great for wave analysis validation. All the best to you. Hubert