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GBPUSD and the Unreliable Trend Line

GBPUSD is back in bearish mode after it fell to as low as 1.2245 today. That is 530 pips below the high of 1.2774 reached two weeks ago. While most people would say the Fed’s decision to raise rates is the reason for the pair’s plunge, we think that GBPUSD would have plunged with or without an interest hike. Keep in mind that the Fed raised rates on December 14th, but our premium clients received the chart below before the market opened on December 12th.(some marks have been removed for this article)
gbpusd-4h-12-12-16
In fact, there was a rising trend line, which could have been expected to provide support for GBPUSD’s next leg up. The Elliott Wave Principle, on the other hand, suggested the bears should be able to break that trend line and drag the pair even lower. Furthermore, charts are all Elliott Wave analysts need to make such forecasts. Now, let’s see an updated one of GBPUSD.
gbpusd-23-12-16
Why did traders buy GBPUSD in the two days before the Fed’s rate decision remains a mystery to us, since a rate hike was almost guaranteed. Nevertheless, once the inevitable happened, the market, which has been anticipating it, moved in the right direction. As expected, the rising trend line was broken, opening the door for the larger slump we are witnessing.

Trend lines are a useful tool in conventional technical analysis. However, no trend lasts forever and therefore no trend line holds forever. With Elliott Wave analysis, you no longer have to blindly rely on trend lines in your trading. GBPUSD is a great example.

What to expect from now on? What is the bigger picture saying? Is GBPUSD going to continue even lower or the support near 1.2250 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your Elliott Wave analysis due out every Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.



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