GBP/USD Aiming At 1.30, But May Tumble To 1.21 First

Not long ago, we shared our long-term view of GBP/USD. In our opinion, the down-phase of the pair’s cycle, which is in its 13th year now, is almost over. One last dip to 1.1000 is likely to be followed by a major bearish reversal and the start of the next up-phase.

Now, we are going to focus on the short-term. GBP/USD closed in the vicinity of 1.2500 last week, up from 1.1412 in March. The structure of this recovery is what we are interested in here. Let’s examine it on the 2-hour chart below.

GBP/USD 2 Hr Chart

The rally from 1.1412 to 1.2648 looks like a clear five-wave impulse pattern, labeled i-ii-iii-iv-v. It fits into the position of wave “a” of 4 in the big picture outlook. According to the Elliott Wave theory, a three-wave correction follows every impulse.

The dip to 1.2248 on April 21st is too small and shallow to be the entire wave “b”. Therefore, we think wave “b” is still unfolding. This means one last drop to roughly 1.2100 can be expected in GBPUSD before the bulls return in wave “c” of 4 towards 1.3000.

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