GBPUSD has continued its slide further over the last few trading sessions and print fresh lows around 1.2250 level. We have re-adjusted the wave counts here according to the price drop, as GBPUSD unfolds into 5 waves lower from its swing highs at 1.2800 mark.
The drop from 1.2800/10 through 1.2250 can be sub divided into 5 waves now. This could be the beginning of a larger correction which could extend towards 1.1950 levels going further. We have labelled the drop to 1.2250 as Wave A, within a potential A-B-C correction.
Also note that 1.2250 is fibonacci 0.382 retracement of the entire rally between 1.1414 and 1.2800/10, which is not seen on the hourly chart here. The formation of Wave A seems to be a leading diagonal. If the above counts are correct, GBPUSD should soon resume a counter trend rally towards 1.2530.
Wave B rally could reach the fibonacci 0.50 retracement of Wave A, which is around 1.2530 levels. It can also travel towards 1.2600 levels, which is the fibonacci 0.618 retracement of Wave A. Either way, GBPUSD should resume lower again towards 1.1950 at least, after terminating Wave B.
Wave C should then drop towards 1.1950 levels, which is fibonacci 0.618 retracement of the entire rally between 1.1414 and 1.2800/10 respectively. Further, also note that the fibonacci 0.618 extension of Wave A (counter trend) is also seen around 1.1920 levels, which is coinciding with the above retracement.
A fibonacci convergence is seen towards 1.1930/50 levels going further. If GBPUSD manages to drop towards the above convergence, we can expect an electrifying bounce from close to 1.1930/50 mark. This will mark the resumption of rally towards 1.4300 and 1.4500 resistance over the long term.
Traders might see opportunities to trade on both sides. Initially might consider short from around 1.2530/50 levels against 1.2800 targeting 1.1950. Thereafter turn bullish against 1.1414 lows.
Technical Analysis Team
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