GBPUSD might have completed its counter trend rally around 1.3070/80 levels yesterday. The currency had reversed sharply towards 1.2920 mark, dropping more than 150 pips. Bears might be poised to remain in control from here and push through 1.2200 levels, going forward.
GBPUSD has dropped to multi-year lows around 1.1414 in March 2020. Since then, the currency has broadly remained in control of bulls pushing through 1.3500 mark on September 01, 2020. The entire rally between 1.1414 and 1.3500 might be an impulse wave.
Ideally, an impulse wave is followed by a corrective wave in the opposite direction. The corrective wave might turn out to be a flat or a zigzag. Also note that corrective waves are 3 wave structure, labelled as A-B-C. Further, the drop between 1.3500 and 1.2675 might be Wave A within the zigzag structure.
The recent rally between 1.2675 and 1.3075 might be marked as Wave B within the corrective drop. Also note that Wave B has reached the fibonacci 0.50 retracement of Wave A, an ideal point of reversal. If the above is correct, Wave C should resume lower towards 1.2200 levels.
Alternately, GBPUSD might push through fibonacci 0.618 retracement of Wave A, which is seen through 1.3175 levels. Wave C might resume lower towards 1.2200 levels, thereafter. Bottom line remains that price action should stay below 1.3500 mark for above structure to remain valid.
Immediate support is seen towards 1.2850/60 mark and a break below that would certainly confirm that a meaningful top is in place around 1.3075 and that GBPUSD is heading lower from here.
Short against 1.3500, target is 1.2200.