The GBP/USD is most likely about to approach its first bigger pause within its new downtrend. Today’s analysis will take a look at the most recent price-action and highlight potential counter-trend trade setups.
The Cable appears to have finished a complex sideways correction within Wave 4 of the new downtrend over the last few trading days. Price began to break lower earlier today, which was probably the final sell opportunity for the time being, as price approaches a confluence zone of support during wave 5. Here is what I see:
Should this support area not hold, the Cable will be vulnerable to an immediate severe sell-off as it would mean that an extended wave 3 is most likely unfolding, which won’t create any significant relief rally.
A bigger bullish correction should provide short-term counter-trend trade opportunities. Very aggressive traders could consider placing buy limit orders at the support zone of 1.33 – 1.3340 and using a very tight stop loss policy.
A more cautious alternative is to wait for a bullish break of the blue upper channel line and enter buy positions at the retest of the broken channel line.
The first target should be the top of the range that was created during wave 4 (around 1.36). If the upwards move looks like a clear motive wave, we can further expect that another motive wave will follow suit after a bearish B wave is finished, which could be another entry point option for trading wave c of a potential zigzag.
All the best along your trading journey…