close icon

GBPUSD, not as optimistic as it seems

GBPUSD has been in a strong uptrend for quite a long time. The pair managed to climb up from 1.4812 to nearly 1.70 without making a major correction. Some people even say the strength of the Great Britain Pound may soon start hurting Britain’s economy, since it makes British goods and services relatively expensive. But the science of Socionomics had shown us many times, that fear and greed are emotions accompanying the points of reversal. With fearful economists and greedy bullish speculators, we now have plenty of reasons to look at the situation from a different angle, in order to form an independent opinion. And if you are among our regular readers, you probably know that we prefer using price charts as information source.

It is always better to know where you are on the bigger picture, so we are going to start with the weekly chart of GBPUSD. On the chart below you can see the hard hit, which the pair took during the 2007-2009 crisis, crashing down from 2.1161 in November 2007 to 1.3502 in January 2009.

1 gbpusd big pic proverkata

As the chart shows, this huge decline is in three waves, which according to the Elliott Wave Principle means a complete corrective pattern. GBPUSD never reached the lows around 1.3500 again. Five years later it is looking stronger between 1.68 and 1.70.

Recommended reading: Elliott Wave Patterns

But if we want to determine the nature of this recovery, we will need to go deeper into the wave structure. On the next chart we will examine the price action in the white rectangle to see if it is impulsive or corrective.

2 gbpusd proverka

Only three waves a-b-c to the upside suggest a correction. Since this is only the first part of the whole 5-year period, we are labeling this rally (W). Now let’s go back to the larger time-frame and see how the situation has changed with this new labeling.

3 gbpusd big pic kraina proverka

Wave (W) to the upside means that the normal further development includes waves (X) down and (Y) up. It seems that GBPUSD has fulfilled these conditions so far. According to this count, the last big rally should be wave “y” of (Y). Its sub-structure is given on the following chart.

4 gbpusd daily kraen

As we take a look at the price swings, we see that the latest moves are forming something quite similar to an ending diagonal. If this is the correct count, GBPUSD has to make one more wave higher to probably 1.7050, obeying the requirement of wave (Y) reaching above wave (W).

Recommended reading: Ending Diagonal? What is this?

And since we are talking about an ending diagonal, if this really happens, we will be preparing for a reversal to the downside. On the weekly chart, this whole analysis looks like this:

5 gbpusd big pic

GBPUSD and EURUSD often coincide. Our view of EURUSD is extremely bearish.

Recommended reading: EURUSD may fall even sooner

Because of this we consider that being bearish on GBPUSD is not a bad idea, especially when our count is supporting it as well. If this is the correct count, 2014 may be a very bad year for the British Pound.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

GBPJPY Bears Aiming at 120, Before Giving Up

Whether it is because of Brexit or not, GBPJPY has been trading below 160.00 ever since the referendum in June 2016. The pair has been locked in a wide range between 156 and 124 for four years now. Last week, it closed the session at 134.66, down from 138.84 at the open. In order to…

Read More »

Elliott Wave Setup Helps EURUSD Add 325 Pips

EURUSD has been under pressure for over two years now. The pair reached 1.2556 in February 2018, but has been making lower lows and lower highs ever since. Yet, the past couple of weeks painted a different picture. Between May 18th and May 29th, the euro surged 325 pips against the U.S. dollar. In those…

Read More »

EURGBP Pattern Signals Bullish Reversal Ahead

EURGBP has been in free fall since March 19th, when it rose to 0.9500. A month and a half later now, the pair is hovering below 0.8730, down 8% from the peak. Is the downtrend going to continue or should we expect a change of direction? That is the question we hope to answer in…

Read More »

GBPUSD Aiming at 1.30, but May Tumble to 1.21 First

Not long ago, we shared our long-term view of GBPUSD. In our opinion, the down-phase of the pair’s cycle, which is in its 13th year now, is almost over. One last dip to 1.1000 is likely to be followed by a major bearish reversal and the start of the next up-phase. Now, we are going…

Read More »

British Pound ‘s 13-Year Downtrend Almost Over

The thirteen-year period between 2007 and 2020 started with the biggest crisis since the Great Depression and is about to end with the biggest crisis since the Great Depression. Between the two, the longest economic expansion on record took place. And while stock markets around the world reflected that recovery, some currencies have been in…

Read More »

Ahead of the Move: EURUSD Adds 500 Pips in a Week

At the start of last week EURUSD was trading below 1.0700. The pair had fallen from as high as 1.1496 in just two weeks as coronavirus cases in Western Europe kept climbing disturbingly fast. And while fundamental traders had every reason to expect more weakness, the charts were sending a different message. The Elliott Wave…

Read More »

GBPUSD Completes Pattern, Uptrend to Resume

When we last wrote about GBPUSD Britain was still an EU member. Today, that is no longer the case as the country left the Union on January 31st. On the other hand, the pair is roughly unchanged, currently hovering around 1.2900. In fact, GBPUSD has been tracking a classic Elliott Wave pattern. Take a look…

Read More »

More analyses