The GBPUSD exchange rate dropped by more than 1100 pips during the last two months. Traders are probably wondering if it is time for a larger correction.
In mid-1930s Ralph Nelson Elliott wrote, that price trends move in waves. He formulated the general postulate of his Wave Principle as follows: five waves in the direction of the larger trend, followed by three waves against it. If you have seen our long-term forecast of GBPUSD, you probably know, that we are highly bearish about it. That is why we expect a downtrend confirmation by this forex pair in the form of a five-wave sequence.
As the chart shows, we suspect that the fifth wave is under construction right now. Fifth waves are never guaranteed, of course, but if this is the correct count, GBPUSD should make a new bottom, probably below 1.60. However, the bears should not get too excited, because, according to the theory, a temporary reversal is likely.