Bottom line: GBPUSD bears are very close to completing a multiyear diagonal structure close to 1.1290 as highlighted here. The downside looks limited from here, as most traders might prepare for a reversal ahead.
Technical Analysis:
GBPUSD structure remains unchanged from what was presented here on March 19, 2020. Looking at the recent drop since 1.3515 levels, bears might remain poised for yet another push towards 1.1290 to complete the drop a-b-c that began since 1.4400 levels earlier. Also note that the support trend line of the ending diagonal is also seen to be passing close to 1.1250 levels. Another drop below 1.1414 could produce a throw under, an ideal way to terminate a diagonal structure. Alternately, a 5 wave rally on the lower time frames would indicate that GBPUSD might have formed a meaningful bottom at 1.1414 levels and that the larger trend might be turning higher. In the latter scenario, most traders might be preparing to initiate long positions against 1.1414, with a medium term target above 1.4400 levels respectively. Looking at a larger degree wave structure since 1.2100 levels, GBPUSD seem to have unfolded into 5 waves, with each wave sub dividing into 3 waves. Wave 1 unfolded as a zigzag between 1.2100 and 1.3500 respectively. Wave 2 was a flat and remained sideways for 5 years before terminating around 1.7200 levels. Wave 3 again unfolded as a zigzag a-b-c and terminated around 1.1950 levels. Wave 4 termination might be labelled at 1.4400 levels before finally producing a Wave 5 drop that might have completed at 1.1414 or could complete at 1.1290 levels respectively. If the above counts are correct, GBPUSD is close to forming a major bottom and turning higher for a much longer period. Watch out for the first impulse rally to confirm.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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