GBPUSD preferred Elliott wave structure suggests pair is in an Ending Diagonal structure where wave ((4)) completed on 12/6 at 1.2775. Each sub-wave of a diagonal pattern sub-divides in 3, 7 or 11 swings. As the chart below shows, wave (W) of ((5)) completed at 1.2198 followed by a 3 wave bounce to 1.2432 which completed wave (X). This bounce failed in 100 – 123.6% extension area of W-X (1.2390 – 1.2435) and offered a selling opportunity there. Pair has since broken below 1.2198 low and is now showing 5 swings down from wave ((4)) high. 5 swings is an incomplete sequence and should result in a bounce and another swing lower to complete 7 swings Elliott wave sequence. That’s why we expected the bounce which started on 11 January 2017 to fail in 3, 7 or 11 swings and turn lower again. As far as (X) high remains in place, we expect the pair to continue lower towards 1.1856 – 1.1720 area to complete 7 swings sequence from 1.2775 peak and then it would have scope to start a larger 3 wave bounce.
GBPUSD 4 Hour chart
GBPUSD 4 hour chart showing the structure and downside target to complete 7 swings which lies between 1.1856 -1.1720 area. Only a break above 1.2432 (X) high would negate the push lower and this structure.
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