Bottom line: GBPUSD bullish structure is expected to remain intact until prices stay above the 1.2700 levels, going forward. Bulls remain in control as they take out 1.3200 resistance.
Technical Analysis:
GBPUSD breaks above 1.3070 and 1.3200 interim resistance levels and confirm that bulls remain in control. A meaningful bottom could be in place at 1.2700 as discussed last week and a break above 1.3200 today confirms. Looking into the overall wave counts since 1.1950 levels, the GBPUSD has produced a classic 5-3 Elliott Wave pattern last week. The rally between 1.1950 through 1.3515 can be clearly sub divided in 5 waves, labelled as Wave (1). Please also note that Wave 2 was sharp while Wave 4 had unfolded into a triangle a-b-c-d-e, terminating around 1.2820/30 levels. Going further, the corrective drop A-B-C potentially completed around 1.2720 levels close to the previous wave 4 around 1.2820 respectively. It is a common wave relation for Wave 2 to terminate close to previous wave iv of one lesser degree. Please note that potential for a Wave (2) termination remained through 1.2550 levels as discussed earlier. Now, since GBPUSD has rallied through 1.3200 levels, it is more or less confirmed that 1.2720 lows should hold, going forward. With Waves (1) and (2) potentially in place at 1.3515 and 1.2720 respectively, GBPUSD bulls should remain poised for a Wave (3) rally towards 1.4200/1.4500 levels. Most traders might be willing to initiate fresh long positions on corrective drops from here. Furthermore, the rally from 1.2720 through 1.3200 could be labelled as a lower degree Wave 1 within Wave (3). If the above counts are correct, GBPUSD is expected to produce a corrective drop Wave 2 towards 1.2900 levels, before resuming again. Traders might be preparing to go long around 1.2900/50 levels with protective stop at 1.2700 and projected targets above 1.4200.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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