In our previous post, released on May 28, we talked about the long-term ascending channel (read more.) The upward structure suggests more upsides for the Pound Sterling. In this post, we’ll review the short-term sequence and what to expect for the coming days.
The Panoramic 4-Hour Chart
The second bearish leg started on March 13, 2019 (1.33806) shows exhaustion signals. Cable bounced from the blue box surpassing in a five wave sequence the previous high 1.27479.
If we observe the RSI oscillator, we have to consider two elements:
- Divergences. The two bullish divergences on the downward price action are signals of exhaustion of the bearish cycle. After the bounce from the blue box, the RSI made a bearish divergence. This divergence makes us suspect that this move could correspond to an internal Wave 1.
- Resistance breakout. Within the last upside, the surpass of the 60 level represents a potential reversal signal. This signal will have confirmation if the oscillator finds support on the 40 level. The following resistance level, for the bullish cycle, is at 80 level.
The Inverse Wave
If the first bullish move is valid, the corrective sequence could be a zigzag. The inverse wave suggests that the GBPUSD pair should find buyers in the zone between 1.2630 and 1.2592. Buyers should drive to the price to the area between 1.2844 to 1.2883. The invalidation level for this scenario is at 1.2558.
Remember that the price does not necessarily move as our analysis suggests. The chart released corresponds to an Elliott Wave Analysis application.