GBP/USD Elliott Wave Analysis

GBP/USD – 1.5053

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

Although the British pound rebounded again to 1.5218 last Friday, as the price action from 1.4781 temporary low still looks like a flat correction (minor wave iv kind of correction), suggesting recent decline would resume after consolidation and bring test of 1.4873, break would signal the wave (iii) has resumed and bring retest of 1.4781 and later towards 1.4600 and possibly 1.4500 but 1.4365 (2 times extension of wave (i)) should hold.

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 ended at 1.6879 as a failed 5th. Early breach of support at 1.5708 (previous forth of a lesser degree) confirms wave 4 has indeed ended and further weakness towards 1.4500 is possible but reckon 1.4365 would hold from here.

On the upside, above resistance at 1.5218 would bring stronger retracement to 1.5289 (100% projection of 1.4781 to 1.5197 measuring from 1.4873 and possibly 1.5345 (previous support turned resistance) but sterling should falter below 1.5422 (38.2% Fibonacci retracement of 1.6459 to 1.4781) and bring another selloff later.

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.