GBPUSD might have entered a corrective phase towards 1.1900, before the rally could resume. The drop from 1.2810 has sub-divided into 5 waves towards 1.2260 lows, before pulling back yesterday. The rally could extend towards 1.2500/30 levels before finding resistance.
The probable wave counts could be as follows: GBPUSD rally between 1.1414 and 1.2800/10 can be seen in clear 5 waves. The 5th wave fell short of the fibonacci extension at 1.2850 and GBPUSD reversed lower. The entire rally can be labelled as a higher degree Wave (1) on the chart.
After a 5 wave rally, it is normal to expect a 3 wave drop in the opposite direction. GBPUSD has dropped from 1.2800/10 handle through 1.2260, sub dividing into 5 waves (potential leading diagonal). This drop could be labelled as Wave A of the proposed A-B-C correction.
Yesterday’s rally has been in accordance to our expectations of a potential Wave B termination around 1.2530. The 1.2530 handle is close to the fibonacci 0.50% retracement of the previous drop (Wave A). Normally Wave B corrects Wave A by 50% pullback.
Once Wave B terminates close to 1.2500/30 levels, thee drop could resume lower toward 1.1950 handle, to terminate the last Wave C of the entire corrective drop. Please note, Wave C could also be marked by Wave (2) termination of one larger degree.
Thereafter, we can expect a Wave (3) rally to resume towards 1.3500 and 1.4300 respectively. For now, GBPUSD is expected to complete Wave (2) correction towards 1.1900/1.2000 handle. Overall, GBPUSD remains a sell on rallies case, at least for a short time.
Aggressive Short against $1787/90, targeting below $1046 in the long term.
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