GBPUSD had rallied through 1.2500/30 levels over the last week as expected and discussed here. The currency pair is trading just below the 1.2500 mark and should remain poised to resume lower towards 1.2250 and 1.1900 levels, going further.
Let us have a look at potential wave counts on the hourly chart. GBPUSD had hit resistance just above the 1.2800 handle and remained shy by a few pips of hitting the fibonacci 0.618 extension to terminate Wave 5, to complete an impulse rally from 1.1414 lows.
We still favour that a potential 5 waves rally was complete around 1.2800 levels. An impulse is normally followed by a corrective wave in the opposite direction. GBPUSD was most likely expected to produce a corrective A-B-C drop.
Going further, the drop from 1.2800 through 1.2250 was an impulse wave. Structurally it could be labelled as Wave A within the proposed A-B-C drop. GBPUSD should unfold as a zigzag corrective drop to complete the structure.
A zigzag unfolds as a 5-3-5 pattern and since Wave A has unfolded into 5 waves lower, the probable corrective wave should be a zigzag. The counter trend rally from 1.2250 through 1.2500/30 could be labelled as Wave B of the entire corrective structure.
Ideally, GBPUSD is expected to unfold another 5 waves lower towards 1.1900, going further. This should complete the zigzag pattern and GBPUSD should be ready to resume higher again. At the moment, most traders might want to remain short against 1.2800 levels.
Technical Analysis Team
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