Bottom line: GBPUSD short to medium term structure still remains bearish until prices stay below 1.3515 levels. A sharp drop unfolding towards 1.2550/1.2750 levels still remain possible.
Technical Analysis:
GBPUSD bulls are going strong over the larger wave structure since 1.1950 levels earlier; but short term picture still looking incomplete. A drop below 1.2900 levels would complete minimum requirement for the corrective wave that began from 1.3515 levels. Looking at the overall wave counts since 1.1950 lows, the GBPUSD has clearly rallied in 5 waves towards 1.3515. Also note that major resistance at 1.3400 was taken out during the above rally, labelled as Wave (1). Ideally, a 5 wave movement is often retraced by a 3 wave correction. In this case, we can expect a 3 wave corrective drop before the rally could resume. Please note that Wave A of the corrective drop had terminated at 1.2900 levels earlier. Wave B came close to terminating around 1.3280 levels or might have unfolded as a running flat terminating at 1.3210. If the above counts are correct, a Wave C drop should be underway towards 1.2550/1.2750 levels respectively. Numerous convergences are seen towards the 1.2550 mark; fibonacci 61.8% retracement of previous rally, past resistance turned support zone, fibonacci 0.618 extension of Wave A and backside of the resistance trend line (1.2425 levels). GBPUSD remains a candidate to be bought on dips towards the above described levels, as potential Wave (2) terminates. Also note that 1.2850 levels could offer the required bounce since it is close to previous wave iv termination. Hence, a conservative trading strategy could be to remain flat for now and look to buy at lower levels for a Wave (3) rally towards 1.4200/1.4500 respectively. Also note that prices must stay above the 1.1950 mark to keep the above structure intact.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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