In my original post of Pound Sterling’s Prospects - seeing through the “Brexit” fog published just before the UK’s Brexit vote, a significant low was anticipated towards the late 2016 and early 2017. That low formed in October 2016 at lower than I anticipated. Since then a sustainable rally was anticipated which due to overlapping swings has not bee easy to ride during the entire period.
Subsequently, some wave counts have had to be adjusted but in conjunction with other forms of TA it seems we could be completing an ABC zigzag and should be on the watch for intermediate trend change with only limited upside remaining. Summary of note: 1. Wave A of October low is in 5 minor waves. 2. A deep retracement to Jan 2017 low in zigzag previously was seen as part of triangle correction wave B. However now it seems that wave B completed at Jan 2017 low. 3. Wave C should develop in 5 minor waves. We note this being the case with wave 4 as running flat, ie wave “b” travels beyond the origin of wave “a” and wave “c” stops short of wave “b” low. A running flats formation generally suggest stronger price to follow in the direction of the larger trend.. 4. We are in wave 5 of C and so far could have minor waves i to iii complete. 5. We might drift sideways to lower and with BOE’s Rate Decision and Monetary Policy Statement due on Thursday, could be rather quite. 6. Rates are likely to remain at current level but associated comments might spark another rally in GBPUSD. 7. Regardless, it is anticipated that to complete this cycle we need minor wave v of 5 of C to complete. 8. There are various possibilities for upside target to complete the cycle 9. Under Wave equality: a. Wave A x 1.618 = Wave C = 1.3300 b. Wave A x 1.786 = Wave C = 1.3443 c. Wave 5 = Wave 1 x 100% = 1.3500 d. Wave 5 = Wave 1- 3 x 0.5 = 1. 3300 e. Wave 5 = Wave 1-3 x 0.618 = 1.3432 f. Above that, we have structural resistance being the spike low if 2009 at 1.35 Commitment of Traders data show that large speculators have been net short for the entire rally and recently started to increase their position suggesting some upside from here is very likely – see chart below.
Conclusion: A. Short term traders should look to buy weakness during the next week or 2 till we reach the termination of this cycle B. Longer term traders should be on the look out for termination of this rally around the 1.34 -1.35 zone and consider short position on confirmation with usual money management. C. Upon completion of this cycle we could anticipate a significant retracement towards 1.27 -1.28 area D. Seasonally, GBPUSD remains strong till end of September - charts.equityclock.com/british-pound-forex-fxgbp-seasonal-chart
Warning: This is my interpretation of price action using TA approach which I consider helps me the most, but could be completely wrong. Therefore, as always, do your own analysis for your trade requirement and ignore my views.
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DanV
Komen
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Weekly chart with COT data:
Komen
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Minor wave iii (in magenta) of wave 5 of C is being completed now and likely will setup a strong pull back around BOE Rate decision. Overall still has some way to go before completing the cycle.
Komen
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We are progressing as anticipated and note that this is a 3rd longest green candle in the entire rally of the Pike low. This might have some follow though but could be sign of capitulation
Komen
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Close look of the wave v or 5 of C
Komen
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It seems that with this momentum lot of stops must have been triggered. The find wave v is still in progress and would not surprise me to see 1.3650 -1.37 being hit -
Komen
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I am adjusting the final wave count of wave 5 of C. Then minor wave iii and iv have been moved higher so that last high of this week is likley wave iii completion and the subsequent pull back as wave iv. If correct then we could still hit the June 2016 gap with wave v anticipated to complete in the range 1.3635 -1.37. Otherwise a clean break below 1.3460 would suggest the cycle has already completed. Here is the chart with these adjustments -
Komen
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If we have completed it then a strong breakout to the upside should follow. Otherwise it might still be in progress progress and might form a triangle as show in the chart. If it does it will more more helpful to confirm the overall wave counts and that we will be expecting a last swing to the upside in this cycle.
Komen
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It seem that the above described triangle did not develop. Instead we have a possible expanding ending diagonal shown in blue square which ended with a spike high followed by sharp sell off. This could change but the sharp sell off appears very impulsive in price action and is likely minor wave i which could be very early part of new down cycle. Confirmation would be on breakdown below 1.3450 but is it work keeping an eye for further clues.
Komen
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I appears that GBPUSD has topped for this cycle and is in early stage of breaking down. So it is safe to start looking to a retracement retesting that support just lost. The decline could be significant retracement or even full reversal
Dear DanV, Q1). what is "TA" you mentioned that's of most help? Q2). in between wave 3 & 4, there is a spike higher than wave 3 (for my limited knowledge, I don't have any spike high in between wave 3 & 4, I always choose the highest close as Wave 3) THANKS for the coach
DanV
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@gcplau, Thankyou for your questions,
Q1). what is "TA" you mentioned that's of most help? Ans. Combination of Elliottwaves, and traditional technical analysis such as trendlines, channels, pitchfork, momentum oscillators, fibonacci, etc.
Q2). in between wave 3 & 4, there is a spike higher than wave 3 (for my limited knowledge, I don't have any spike high in between wave 3 & 4, I always choose the highest close as Wave 3?
Ans. You are correct that most of the time swing high for wave 3 is the highest point. However, there are cases where you have either an expanded or running flats, wave B travels beyond the origin of wave A. IN such cases the highest point is wave B of 4 and not wave 3 its self.
gcplau
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@DanV, Thanks for your concise yet clear explanation. Bravo!
captain_smollett
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Thank you for sharing, Sir! I think Cable may have already reversed as it reached the Upper ML of the fork and price turned down there...
DanV
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@captain_smollett, Thank you for sharing your charts. a nicely place pitchfork. You could be right that the reversal might be developing.It would be confirmed by a follow through on price breaking down. But if it consolidates here, I then there is likley further upside still left. Sentiments still shows that more speculators are still short on GBPUSD. Hence I think we will move highers. FOMC rate announcement and accompanying comments might cause the reversal or more likley provide that last impetus for final drive to complete this cycle.