GBPUSD – NEAR COMPLETION OF ABC ZIGZAG RALLY OF 2016 SPIKE LOW by DanV on TradingView.com
11 September 2017
In my original post of Pound Sterling’s Prospects - seeing through the “Brexit” fog published just before the UK’s Brexit vote, a significant low was anticipated towards the late 2016 and early 2017. That low formed in October 2016 at lower than I anticipated. Since then a sustainable rally was anticipated which due to overlapping swings has not bee easy to ride during the entire period.
Subsequently, some wave counts have had to be adjusted but in conjunction with other forms of TA it seems we could be completing an ABC zigzag and should be on the watch for intermediate trend change with only limited upside remaining.
Summary of note:
1. Wave A of October low is in 5 minor waves.
2. A deep retracement to Jan 2017 low in zigzag previously was seen as part of triangle correction wave B. However now it seems that wave B completed at Jan 2017 low.
3. Wave C should develop in 5 minor waves. We note this being the case with wave 4 as running flat, ie wave “b” travels beyond the origin of wave “a” and wave “c” stops short of wave “b” low. A running flats formation generally suggest stronger price to follow in the direction of the larger trend.
4. We are in wave 5 of C and so far could have minor waves i to iii -0.54% complete.
5. We might drift sideways to lower and with BOE’s Rate Decision and Monetary Policy Statement due on Thursday, could be rather quite.
6. Rates are likely to remain at current level but associated comments might spark another rally in GBPUSD 0.68% .
7. Regardless, it is anticipated that to complete this cycle we need minor wave v of 5 of C to complete.
8. There are various possibilities for upside target to complete the cycle.
9. Under Wave equality:
a. Wave A x 1.618 = Wave C = 1.3300
b. Wave A x 1.786 = Wave C = 1.3443
c. Wave 5 = Wave 1 x 100% = 1.3500
d. Wave 5 = Wave 1- 3 x 0.5 = 1. 3300
e. Wave 5 = Wave 1-3 x 0.618 = 1.3432
f. Above that, we have structural resistance being the spike low if 2009 0.12% at 1.35
Commitment of Traders data show that large speculators have been net short for the entire rally and recently started to increase their position suggesting some upside from here is very likely – see chart below.
Conclusion:
A. Short term traders should look to buy weakness during the next week or 2 till we reach the termination of this cycle.
B. Longer term traders should be on the look out for termination of this rally around the 1.34 -1.35 zone and consider short position on confirmation with usual money management.
C. Upon completion of this cycle we could anticipate a significant retracement towards 1.27 -1.28 area.
D. Seasonally, GBPUSD 0.68% remains strong till end of September - http://charts.equityclock.com/british-pound-forex-fxgbp-seasonal-chart
Warning: This is my interpretation of price action using TA approach which I consider helps me the most, but could be completely wrong. Therefore, as always, do your own analysis for your trade requirement and ignore my views.
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DanV