GBPUSD might have carved a lower high over the last week around 1.3175 levels. Furthermore, the drop had extended through 1.2850 levels before bulls managed to pull back. The currency had managed to push through 1.3140 highs overnight before reversing sharply lower.
GBPUSD bears seem to be in control and might be preparing to push lower towards 1.2200 levels at least. The currency trades around 1.3000 levels for now and ideally should stay below 1.3140 highs. A drop below 1.2675 would accelerate lower.
Alternately, GBPUSD might be unfolding its counter trend rally that had begun from 1.2675 levels earlier. If the above holds well, we could see prices pushing beyond 1.3175 levels going forward. It might complete the corrective wave, before it resumes lower again.
GBPUSD had dropped through 1.1414 lows in March 2020. Since then, bulls had remained in control and managed to push through sub 1.3500 resistance. Ideally, prices should stay below 1.3500 mark and retrace the entire boundary between 1.1414 and 1.3500 respectively.
The corrective drop seems to have completed Wave A lower towards 1.2675 levels. A potential Wave B is either complete around 1.3175 or it could extend through 1.3200/50 levels going forward. Either way, once we have Wave B terminated, GBPUSD is expected to resume lower again.
GBPUSD remains a good candidate to be sold on rallies towards 1.3200/1.3300 respectively. The currency should stay below 1.3500 resistance to keep the above bearish structure intact. A drop below 1.2860 from here would confirm that bears are back in control and that prices might not reach 1.3200 levels.
Short against 1.3500, target is 1.2200.