GBPUSD had a good run over the past six months, climbing from its 1.1412 March low to as high as 1.3483 last week. The pair is now back below 1.3000 after the latest portion of Brexit-related mess. Later in this article we will share our view of where the Pound is headed against the dollar, but first let’s see how our previous analysis turned out.
GBPUSD was hovering slightly below 1.2500 when we last wrote about it on May 3rd, 2020. Our Elliott Wave analysis made us think the pair was “aiming at 1.30, but may tumble to 1.21 first.” The chart below helped us reach that conclusion over four months ago.
The pair’s 2-hour chart revealed a five-wave impulse up to 1.2648, labeled as wave ‘a’. According to the theory, every impulse is followed by a three-wave correction in the other direction. By early May, wave ‘b’ was still missing its third leg.
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Therefore, we thought “one last drop to roughly 1.2100 can be expected in GBPUSD before the bulls return in wave ‘c’ of 4 towards 1.3000.” Four months later now, the updated chart below shows how the situation unfolded.
Wave ‘b’ reached a bottom of 1.2076 fifteen days later, on May 18th. From then on, there was nothing standing in the bulls’ way. GBPUSD reached and exceeded the 1.3000 mark in late-July and almost went for 1.3500. However, the recent bearish reversal, although not very precisely predicted, was also part of the plan.
That is because the entire a-b-c recovery from 1.1412 to 1.3483 fits in the position of wave 4 of a larger pattern. To find out what that pattern is and what it means for GBPUSD going forward, take a look at our big picture analysis.
What will EURUSD, USDJPY and USDCAD bring next week? That is the subject of discussion in our next premium analyses due out late Sunday!