We have been waiting for a bottom in EURGBP for quite a while now. In our previous analysis of this pair – “EURGBP Could Turn Bullish Soon” – the chart was suggesting we are probably in wave (5) of a five-wave impulsive sequence. The length of fifth waves is difficult to predict. Sometimes they barely exceed the extreme of the previous third wave. Sometimes they could even be truncated. And sometimes they could be extended. In this case, EURGBP chose the last possibility.
The chart above shows the wave (4) triangle, which is the main reason we are expecting a reversal, because triangles precede the last wave of the larger pattern. Here, it precedes the extended wave (5). Just like any other impulse, wave (5) has a five-wave structure, which is clearly visible on the chart. Furthermore, wave 5 of (5) seems to be an ending diagonal. If this count is correct, we have a reason to expect a significant recovery in EURGBP, because the Elliott Wave Principle signals for two degrees of trend approaching their termination point. However, it is always better to wait for the upper line of the ending diagonal to be broken. This serves as a confirmation of the validity of the count, thus adding the confidence every trader needs to take the risk.
