GBPUSD formed a top at 1.6822 on February 17th 2014 and has been in corrective mode for more than a month, bottoming at 1.6460 on March 24th. If we look at the 4-hour chart of GBPUSD, we could see that the price action has formed a classical 5-3 Elliott Wave pattern. What is more interesting is that price bounced up exactly from the 61.8% Fibonacci level. If you are familiar with the Wave Principle, you probably know that this is not a coincidence and it happens quite often.
But the 4-hour outlook is not enough for us to start buying. In order to become more confident, we will take a closer look into the white rectangle. What we need to see there is a smaller impulse wave, confirming that the uptrend has resumed.
And we got it. Five waves to the upside, means that we have to wait for a three-wave decline, before a buying opportunity in GBPUSD is present. Ideally, entries could occur around 1.6540. Stop loss at 1.6460 and first take profit above 1.6822, give us a risk/reward ratio of at least 3,5:1. From an Elliott Wave point of view it is a textbook situation.