Executive Summary
- Current Trend Bias: GBP/USD is in an impulsive rally, with Wave (iii) likely underway.
- Key Bullish Level to Watch: Bullish view while above the wave (ii) low at 1.2249.
- Target Levels: Near-term target levels at 1.2678, 1.2951, 1.3407
Current Elliott Wave Analysis
Higher Degree
The Elliott wave chart suggests that GBP/USD completed a five-wave decline at 1.2099, marking the termination of a Wave (v) at a minor degree. We were anticipating a major bullish reversal on January 10 near 1.2000. The decline could only make it to 1.2099 on January 13..
The pair has since reversed into an impulsive structure, indicative of a larger Primary Wave 3 rally (not shown) is unfolding. This aligns with the classic “impulse wave” behavior, where a third wave is often the strongest.
Lower Degree
Zooming in, Wave (i) peaked at 1.2524, while Wave (ii) retraced deeply to 1.2249, respecting the 61.8% Fibonacci retracement level. The ongoing price action appears to be a developing Wave (iii), with the price breaking above the descending resistance trendline from earlier waves, signaling bullish momentum. Fibonacci extensions place the next resistance at 1.2951, coinciding with the 161.8% level, which is typical for extended Wave (iii) patterns.
Forecast
As long as prices remain above 1.2249, the rally should continue toward 1.2678 (100% extension) and potentially extend to 1.2951 (161.8%) or 1.3407 (261.8% extension). However, a break below 1.2249 may indicate a deeper correction, invalidating the impulsive structure.
Bottom Line
GBP/USD is in a bullish impulsive phase, with initial targets of 1.2678, 1.2951, and possibly 1.3407. Key support at 1.2249 should hold for the bullish scenario to remain valid.
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