A cooling down Cable…
The heat of Brexit is still surrounding the Cable. There was no surprise that GBPUSD went into a consolidation days after Brexit. The market saw sharp moves back and forth until the end of July with a 14-day ATR ranging around 200 pips. The current ATR has dropped to around 130 pips – an indication of the GBP cooling down, and going along with the current price and market conditions.
But it does not mean the Pound would stay in the lower side of the market for too long. Because the wave C is due any moment and the forecast is to recover a good chunk of the Brexit decline before it would plummet to the bottoms again. I know these are some bold claims to make, especially in the current market conditions. But according to the current wave analysis that would be the expectation.
However, it’s important to note, that markets do not always move as we expect. Many a times there are circumstances, that we have to alter and relabel the charts as the markets evolve and become more clearer with regards to the direction and chart patterns. If you are a seasoned trader, you already know this. We trade not to be right all the time, but to be profitable overall. That is the ultimate goal of every trader – to be profitable consistently.
Gartley is here
There is a possible Gartley pattern forming in the charts. The price could make a final thrust – a stop-run or a manipulation before reversal. If that is the case the market will produce a nice trading opportunity with a Gartley completion at around 1.29360-1.29400 price range.
Let’s take a look at other probable possibilities as well…
MACD divergence in play
Looking at the H1 timeframe, it seems that the 5-wave bearish impulse has completed the C wave of the lower degree (Minor degree.) To support the case there is MACD divergence on the chart as well. So there is the possibility of price breaking out of the current lows to commence the C wave of higher degree (Imtermediate degree.)
But for this trade setup, the market has to break out of the hourly trendline and consolidate or pullback possibly below the last Friday’s low along with further divergence. But a sharp impulsive breakout too is a possibility, as there is an array of news events lined up for GBP on Tuesday the 9th August.
Reconciliation of last week’s analysis
If you followed last week’s Pound-dollar weekly outlook, then you know the expectation was bullish assuming that the C wave had already started. But the market in fact said otherwise, hence the B label was moved to express the notion of the market – that the B wave is still in progress (Gartley expectation) or perhaps just completed (MACD devergence.) Either way the expectation is for the next C wave to the upside.
Our next objective is to find a logical level (fib or otherwise) that the market is most likely to reverse in order to commence the C wave. This is where the Harmonic patterns come in handy. Simply because they appear within corrective structures, and they also relate to Elliott waves through Fibonacci ratios. Harmonic’s relation to fibs and Elliott does not make it fail-proof. But it is surely an amazing tool to use along side wave analysis.
This is not to say the Gartley pattern completion is the preferred expectation. But if the Gartley does playout, it would provide a highly probable trade opportunity to ride most of the bullish impulse.