Is the Cable in a free-fall?
Gbpusd was in corrective wave for more than two weeks, since the Brexit debacle. Finally the pair managed to break out of the corrective structure to the downside, as expected. Our initial expectation was for an ABC correction with a C wave to reach as high as 1.34000 levels. In the end it was a totally different pattern as the market completed a WXY double-three correction as the 4th wave.
So what it means in terms of long-term wave analysis and forecasts?
The correction of the hourly chart however, does not by any means fit the profile of a Cycle wave since the wave-2 correction took just over 4 months to complete. So it means that the market is still in the 5th wave of the primary degree.
Many counts – a possibility…
This is still our preferred count. But there are few important questions as price potentially is at a crucial zone. This may be a bit confusing, but its sufficient to know that there are many possibilities of slightly different counts. e.g. The primary degree labels (marked in circles) may be shifted two positions forward to produce a count to say the market is still in the third wave; not the fifth. Yet again forecasting an impulsive decline though.
As discussed in the
Elliott wave analysis of 25-06-2016 there is only one alternative count, that forecast a bullish impulsive wave of a longer term. That is when the Cycle degree would be a ZigZag correction, instead of a (expected) 5 wave. If that is the case, the market is possibly at a turning point.
A look at the Fibs
According to the Fibonacci analysis, price is falling sharp through the 100% expansion of both – the 1st wave of the Cycle degree and the 3rd wave of the primary degree. Although not a rule, Elliott suggested that C waves are more likely to be the same size as the A wave. Our experience is that 1.27 or the 127% is a highly probable target for both C or 3rd wave.
But there is no sign yet, of an exhaustion. However, if there is exhaustion at the next 127% expansion (by the way, a nice confluence of both fibs at around 1.24300,) then the alternative count may be considered.
But until then, there is no change in the bearish forecast of the gbpusd.