Did Brexit Fears Cause GBPUSD’s Plunge?

What a surprising week this is for GBPUSD. Less than five trading days ago, on March 18th, the pair was flying above 1.4510 and just look how fast things change – today it plunged to 1.4056 so far. According to most mainstream analysts, Brexit fears are responsible for this week’s sell-off in GBPUSD. And it sounds logical as long as you do not ask the following questions: wasn’t Brexit a threat last week as well? Or it was probably not that scary last week, which allowed the Sterling to fly against the dollar, but all of a sudden became so horrible, that GBPUSD crashed by nearly 460 pips? What a surprising week this is for GBPUSD, indeed.
Or is it? While most experts are trying to explain the swings in the FOREX market with political or economic events, we prefer relying on the Elliott Wave Principle. Most often than not, it manages to warn us about what is coming long before mainstream analysts have any idea. The chart below, which we sent to our premium clients on March 21st, proves the validity of this statement.(some of the marks have been removed for this article.)
3- brexit gbpusd 1h chart
According to the majority, Brexit could be used to explain both a rally and a decline. In our opinion, these explanations are completely useless to traders, who need to stay ahead of the news, in order to profit. But according to the Elliott Wave principle, at the start of this week, chances were definitely in favor of the bears in GBPUSD. That is why, on March 21st, we told our premium clients that “we should expect more weakness … from now on. The key level to observe is 1.4410. Taking it out would confirm the count and open the door for a large bearish move.” That’s it. No Brexit, no fundamentals. Just a chart and Elliott Wave analysis. The next graph shows how things went.
brexit gbpusd update 24.3.16
As visible, 1.4410 was breached on the very same day, which confirmed that the bears have returned. Four days later, GBPUSD is already trading below the lower line of the price channel. This example clearly shows that relying on news and events can do more harm than good, since the same piece of information could usually be used to explain both strength and weakness in the markets. The Wave Principle, on the other hand, cares only about the wave cycle and the most probable future direction. And what is even more important – it admits it could be wrong and usually provides specific price levels to identify a mistake. That is why our premium clients rely on it and we believe it could earn your trust too, if only you give it a chance.

What to expect from now on? What is the bigger picture saying? Is GBPUSD going to continue even lower or the support near 1.4050 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your on demand Elliott Wave analysis now or pre-order the one due out next Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.

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