The pound sterling after its flash crash on October 2016, has been developing a sequence of higher lows. In this post, we’ll review what to expect in the coming months for the GBPUSD pair.
The big picture
During the Asian trading session in October 2016, the pound group dropped above 5 per cent on average. After this bearish climatic move, not until the first quarter of 2018 that the cable made its first bullish leg. This upward sequence found sellers at 1.43767 on April 16, 2018, from where GBPUSD started to drop. The downward cycle found support at 1.23730 on January 02, 2019.
The 4-hour chart
In the 4-hour chart, the cable moves bearish retracing the January 2019 bounce. The bounce from the 10% level (1.2608) gives us a clue for the exhaustion bearish move and the potential next move. With this clue, we expect a limited drop to the area between 1.2516 and 1.2416. Once reached this area, we foresee an upward movement from where GBPUSD could start a new bullish cycle.
Short-term, the bounce from the 200% (1.2516) to 227.2% (1.2414) area, could drive to GBPUSD to climb until 23.6% (1.380). Long-term, we expect a rally which could push it to see fresh highs near to 1.47 zone, it is the upper line of the ascending channel. The invalidation level for this scenario is 1.2373.
Remember that the price is not required to move as our estimate proposes. The charts released corresponds to the Elliott Wave Theory application.