GBP/USD Elliott Wave Analysis

GBP/USD – 1.5600

GBP/USD – Wave (v) of C possibly ended at 1.6879 as a failure 5th

The British pound fell in line with our expectation and the breach of indicated support at 1.5832 together with subsequent selloff to 1.5535 yesterday confirm our bearish count that the decline from 1.6879 (failed 5th) is still in progress with wave i ended at 1.5832, wave ii at 1.6459 and wave iii is still in progress for further decline towards 1.5412 (100% projection of wave i) and possibly towards 1.5300.

Our preferred count on the daily chart is that the major decline from 2.1162 top (9 Nov, 2007) is a 5-waver with wave 1: 1.9337, 2: 2.0399, extended wave 3 has ended at 1.3500 and wave 4 is unfolding with A: 1.4986, B: 1.3655 and impulsive wave C is sub-divided into (i): 1.5068, (ii): 1.4398, (iii): 1.7044 (instead of 1.6745), (iv): 1.5708 and wave (v) has either ended at 1.6879 as a failed 5th. As indicated above the breach of support at 1.5708 (previous forth of a lesser degree) confirms wave 4 has indeed ended and weakness to 1.5412 would be seen but reckon 1.5272 (50% Fibonacci retracement of 1.3500 to 1.7044) would hold from here.

On the upside, whilst recovery to 1.5708 (previous support turned resistance) cannot be ruled out, reckon resistance at 1.5832 (wave i bottom) would hold and bring further fall to aforesaid downside targets. Only above 1.5915/20 would suggest a temporary low is possibly in place but it is necessary to see a breach of 1.6070 to confirm.

Longer term - Cable's rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver and break of support at 1.3500 (23 Jan 2009) would extend to 1.3300 but price should stay well above psychological support level at 1.3000.