Bottom line: GBPUSD overall bullish structure remains intact until prices stay above 1.1950 but intermediary corrective phase looks to drop below 1.2900 at least.
Technical Analysis:
GBPUSD bulls remain in control over the larger term wave counts, but bears seem to remain poised to push below 1.2900 to complete a zigzag. The drop since 1.3515 is probably into its last wave C as labelled on the chart here. The initial drop between 1.3515 and 1.2900 was seen in 5 waves hence GBPUSD should ideally drop below 1.2900 to complete the structure. It is quite possible that Wave B is still unfolding and might be taking shape of a triangle of flat before Wave C drops lower. As discussed earlier on several occasions, corrective waves may test a traders’ patience with respect to time and structure. It is ideal to allow prices to drop towards the potential support zone highlighted on chart here, before initiating aggressive long positions. The following convergences are seen around the support zone: 1. Lower degree Wave 4 terminated around 1.2850, and Wave (2) might bounce from there. 2. Fibonacci 0.618 retracement of the entire rally between 1.1950 and 1.3515 is seen around 1.2550. 3. Past resistance turned support zone is also seen around the 1.2525/50 zone. 4. The back side of resistance trend line is seen close to 1.2400/50 and should act as strong support if prices reach there. The above facts are indicating that GBPUSD is most likely to terminate between 1.2550 and 1.2750 zone, before resuming its rally. Also not that the overall structure from 1.1950 through 1.3515 was an impulse (5 wave), Wave (1). The drop since 1.3515 looks to be corrective into its last Wave C(2). If the above structure holds true, GBPUSD should remain above 1.1950 mark and push higher towards 1.4200 levels as Wave (3) progresses.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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