Executive Summary
- GBPUSD is consolidating but the bullish pattern appears incomplete
- Near-term lows may be in place as wave iv is late in development
- Initial bullish target is 1.2850-1.3000
Incomplete Bullish Impulse Pattern
The rally from April 22 appears to be an incomplete Elliott wave impulse pattern with only three of the five waves in place.
Currently it appears Cable is carving out wave iv of the pattern. When this finishes, it would lead to wave v higher.
Using the guideline of alternation, wave ii was a sideways flat pattern, therefore, we can anticipate wave iv to be a sharp zigzag or triangle pattern.
The market does not have to alternate, but is a guideline that is frequently found.
As a result, wave iv as a sharp decline might dig a little deeper to the 38.2% Fibonacci retracement level of wave iii at 1.2641.
Otherwise, if wave iv carves as a triangle, then micro wave © of the triangle may be complete leading to a short rally in micro wave (d).
Under the triangle scenario, GBPUSD should hold above today’s low of 1.2680.
Regardless, when wave iv finishes, look for a wave v rally to unfold lasting 160-260 pips possibly reaching 1.2850-1.3000.
Current GBP/USD Elliott Wave Count
Therefore, the current wave count for GBPUSD appears to be wave iv of (i) of ((iii)). If this forecast holds, then Cable would rally in wave v of (i) of ((iii)) completing the first impulse of a larger third wave.
Though we are anticipating wave (i) to terminate in the 1.2850-1.3000 zone, there would eventually be much further upside beyond 1.3000 according to the wave count we are following..
A breakdown below 1.2569, though unexpected, would break one of Elliott’s rules and force us to reconsider the primary wave count.
Bottom Line
GBP/USD appears to be carving a small consolidation within a larger uptrend. From above 1.2569, we anticipate Cable would rally to 1.2850-1.3000 to finish wave (i) of ((iii)).
