On September 23rd we gave you our short-term outlook on GBPUSD in an article, called “Intraday Weakness for GBPUSD Rate”. The chart below gave us enough reason to “expect more weakness”, because we had a perfect 5-3 Elliott Wave cycle on it and, according to the theory, the trend should resume in the direction of the five-wave sequence.
GBP USD was trading around 1.6370, when we made that forecast. Those of you, who have been following this pair, probably know how things went. Just as expected, the top of 1.6522 was never reached again. Instead of this, GBP USD declined to as low as 1.5873 on October 15th. Now we need to see where we are and how the whole decline from 1.7190 looks like on the bigger picture.
As you can see, the price action forms something similar to a leading diagonal pattern. It is the same as the ending diagonal with the difference that it occurs in the beginning of the trend, not in its end.
That is why it brings the same meaning as a regular five-wave impulse. Every impulse is followed by a three-wave correction in the opposite direction. Here, the leading diagonal should be followed by one such correction. If this is the correct count, we may see a temporary recovery in GBP USD before the larger downtrend resumes.