GBPUSD – NEAR COMPLETION OF ABC ZIGZAG RALLY OF 2016 SPIKE LOW
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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.
For those who appreciate my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea, then please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
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.
For those who appreciate my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea, then please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
Ghi chú
Weekly chart with COT data:Ghi chú
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.
Ghi chú
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 Ghi chú
Close look of the wave v or 5 of CGhi chú
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 - Ghi chú
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 -
Ghi chú
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. Ghi chú
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.
Ghi chú
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 
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