Bottom line: GBPUSD remains bullish until prices stay above 1.1950 levels.
Technical Analysis:
GBPUSD bulls are seen to be taking a short break since 1.3515 highs print last week. As it was discussed earlier, it has entered into a corrective phase since then and probably completed the first leg around 1.2900 levels earlier this week. Looking at the entire wave structure since 1.1950 lows on September 03, 2019 a clear 5 waves can be seen, terminating a higher degree Wave ((1)) around 1.3515. Ideally, an impulse (5 waves) should be followed by a 3 wave corrective phase as a counter trend. The drop between 1.3515 through 1.2903 could be seen as the first leg, labelled as Wave A here. If the above count holds true, we could witness Wave B higher into the 1.3200 territory; followed by Wave C drop towards 1.2500/1.2600 respectively. Hence trading opportunities are seen on both sides as presented here. Aggressive traders might want to go long now (1.2950), against 1.2900 with potential target at 1.3200; then turn bearish against 1.3515, with a potential target below 1.2600. A conservative trading approach would be to remain flat and trade towards the larger trend direction which is Up. One could initiate long positions around 1.2550/1.2650 levels, against 1.1950 with potential targets seen towards 1.4500 levels; for Q1 2020. Also note that fibonacci 0.618 support and the past resistance turned support zones are converging around 1.2550 levels. A potential inverted Head and Shoulder setup would also carve its right shoulder while prices drop towards 1.2550/1.2650 zones. In general, a higher degree corrective wave ((2)) could be underway towards 1.2550/1.2650 levels before Wave ((3)) could resume towards 1.4500 levels as we enter 2020. Ideally prices should stay above 1.1950 mark, for the above structure to remain intact.
Prepared by
Harsh Japee, Technical Analyst
GBPUSD Chart
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