Bottom line: GBPUSD corrective phase seems to be into its final Wave C, and could drop towards 1.2550/1.2750 levels before finding support again.
Technical Analysis:
GBPUSD intermediary bearish move continues further as Wave C unfolding lower since 1.3284 highs earlier. Ideally, Wave C is expected to print below 1.2900 at least, to complete minimum requirement for a zigzag correction. Please note that GBPUSD has been producing a counter trend drop since 1.3515 highs, projected as A-B-C o the charts. The Elliott Channel for a potential Wave C termination is seen towards 1.2550 for now. This region is also marked as past resistance turned support along with the 61.8% retracement of the previous rally. Hence, a bullish reversal seems more likely around 1.2550/1.2750, if reached. Looking at the overall wave structure since 1.1950 lows, GBPUSD is near to competing a 5 Up and 3 Down structure. The rally between 1.1950 and 1.3515 unfolded into 5 waves labelled as Wave (1). It is being retraced by a corrective zigzag pattern A-B-C, and is expected to terminate below 1.2900 mark. This would be marked as potential Wave (2), expected to bottom around 1.2550/1.2750 zones. If the above structure holds well, prices should remain above 1.1950 and resume Wave (3) rally towards 1.4200 at least. Hence, a high probable trade setup is to buy around 1.3550/1.2750 levels with protective stops at 1.1950 and targeting above 1.4200 at least. Also note that previous Wave 4 terminated at 1.2821, and a common co-relation suggests that Wave (2) might terminate near 1.2800. In either case, expect prices to drop at least below 1.2900 to complete the zigzag pattern, before Wave (3) resumes higher. It remains to be seen if GBPUSD could drop until 1.2550 or find support earlier. Watch out for a bullish reversal soon enough.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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