Bottom line: GBPUSD overall bullish structure remains intact till prices stay above 1.1950.
Technical Analysis:
GBPUSD is correcting lower since 1.3515 highs print on December 12, 2019; and it seems as the first leg of correction might be over at 1.2977 last week. Please note that prices may drop to fibonacci 0.382 supports at 1.2928, before pulling back. The overall wave structure since 1.1950 lows has neatly unfolded into 5 waves through 1.3515 highs; labelled as Wave (1) here. If we consider this as first impulse since 1.1950 levels, a 3 wave corrective drop can be expected before the rally could resume. Alternately, if the current impulse is a part of an expanded flat, prices could drop below 1.1950, to continue the previous bearish trend. Looking at the short term wave structure, GBPUSD has managed to produce 5 waves between 1.3515 and 1.2977 respectively. This could be Wave A, within a potential zigzag corrective drop (5-3-5) from 1.3515. If the above count holds well, we could witness a corrective rally towards 1.3200, followed by a 5 wave drop towards 1.2700 levels at least. This would complete the corrective phase before Wave (3) could resume higher again. Trading opportunities can be on both sides and depending on one’s risk aptitude, positions can be taken. A more conservative trading approach could be to buy on dips towards 1.2700 through 1.2550 levels, against 1.1950, with potential targets above 1.4500 going forward. Immediate price support comes in around 1.2800/50, which is Wave (4) termination of one lesser degree; while interim resistance stays at 1.3515 levels respectively. Structurally, a bullish turn from around 1.2550/1.2700 levels, would resume Wave (3) at a higher degree and we can expect prices to rise sharply towards 1.4500. Also this could mark the end of a multiyear downtrend for GBPUSD.
Prepared by
Harsh Japee, Technical Analyst
GBPUSD Chart
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