GBPUSD Weekly outlook – 25-06-16

Brexit materialized exactly as the word suggests

GBPUSD just saw the most volatile week in 2016. With Brexit referendum poll on 23rd, there was a rally building up for the sharp decline from previous Thursday the 16th until the end of NY session on 23rd. Interestingly though Monday open of the markets marked a positive gap for GBPUSD as well as EURUSD. Although EURUSD managed to close the gap on a Tuesday’s pullback. However, GBPUSD did not pull back to the range of Monday open until the sharp drop upon the release of Brexit results later on the 23rd.

In terms of simple logic, the positive gap on Monday open and the bullish rally up until the last moment before release of the Brexit results; do in fact fit into the puzzle perfectly. Banks, financial institutions and hedge funds did expect the sharp bearish move; regardless of the results. Because there was so much uncertainty surrounding GBP and the Euro-zone. The big funds did prepare themselves for the sharp move. Hence the bullish momentum before the day of voting.

Although price dropped around 1800 pips (difference of the daily high and low 1.50177 – 1.32263 = 17914 points exactly) the net drop for the day was 7976 points exactly. Furthermore if the previous week’s low is compared to current close (1.40122 – 1.36599 = 3523) the difference shrinks to around 350 pips. The story behind these numbers is that the immediate impact of Brexit referendum was very high on the market. None the less, the overall impact is rather consumable considering the buzz and attention at large.

Technical analysis

This was the previous week’s Elliott wave count for GBPUSD. There is also another alternate count, but that does not affect our view for the immediate future. However the price is at a crucial point and the next couple of weeks will guide us in the right direction.

GBPUSD 4-Hour chart on 17th June


GBPUSD Daily chart on 17th June


GBPUSD Weekly chart on 17th June


The decline due to the Brexit results may have marked the low of 3rd wave of the Cycle degree. Because there are two countable 5-wave structures within the 3rd wave two degrees deep (Primary and Intermediate.) Primary degree count is marked in the chart.

GBPUSD Daily chart on 25th June


GBPUSD Weekly chart on 25th June


Looking at the long-term view, the assumption here is that the (b) wave of the Super-cycle degree was complete at the high of July 2014 – 1.71915.

On a technical standpoint, Elliott wavers are to expect a bullish corrective move as the 4th wave Cycle degree. But, if the market moves up with an impulse 5-wave structure rather than a corrective structure, then the alternate count will be considered true (not included in this post.)

The beauty is that both counts expects a bullish move. If the upcoming wave will be corrective or impulsive, only time will tell.

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