GBP/USD Could be at the Start of a New Cycle Higher says Elliot Wave Expert
- GBP/USD recovery this week could mark new upward wave.
- Current bull trend could eventually take GBP/USD up to 1.50.
- GBPUSD headed to mid 1.30s if 1.3049 level does not give way.
© Pavel Ignatov, Adobe Stock
The Pound-to-US-Dollar rate is likely to rise strongly in coming weeks and months as it enters a new cycle higher, according to Alex Geuta, an Elliot Wave expert at currency broker Liteforex.
The analysis indicates a possible rise to a near-term target of 1.3553 followed by a continuation up to an eventual longer-term conservative target in the 1.50s as the up- cycle hits its stride.
What's more, the bullish cycle is about to enter its steepest and strongest period of buying, according to Geuta's Elliot Wave analysis.
"If the presumption is correct, the GBP/USD price should continue rising to the levels of 1.3553 – 1.3715," Geuta says, although he warns that a break below 1.3049 would be a game changer. This level must hold.
Elliot waves are cycles of buying and selling, reflected in rising and falling prices, which are composed of 5 smaller waves numbered 1-5.
Waves 1,3 and 5 move in the direction of the dominant trend whilst 2 and 4 represent corrections. Wave 3 is almost always the longest and the strongest wave.
Above: Elliot Wave concept.
After a 5-wave pattern has finished the market corrects lower in a shallower counter-trend move labeled A,B, and C.
Elliot wave analysts try to establish where exactly today's market is within the broader wave pattern, which enables them to predict what will happen next. In the case of GBP/USD, Geuta argues we are at the beginning of a large Wave 3.
Wave 3s are the most powerful motive wave of all five major Elliot waves in a trending sequence. Not only that, but the market is entering a third wave on several different time frames simultaneously.
The first wave 3 is of the larger 5-wave pattern that started at the October 2016 lows, and has just finished its wave 2 (see chart below).
Above: Pound-to-Dollar rate shown at weekly intervals.
Not only that, but we are also entering a smaller version of that third, wave as shown on the daily chart below. This raises the important point that Elliot Waves are each composed of smaller 5-wave patterns and are themselves components of larger 5-wave patterns, ad infinitum.
Above: Pound-to-Dollar rate shown at daily intervals.
We have also included Geuta's daily chart below which shows the same development as our chart but with more of the detailed Elliot wave labelling included.
Above: Liteforex chart showing technical analysis of GBP/USD.
The four-hour chart below shows a more detailed explanation of why Geuta thinks the market will rise up to the 1.3553 target initially. It also shows how we are entering the wave (iii) of two scales smaller than the large wave (3) of the daily timeframe.
Above: Pound-to-Dollar rate shown at daily intervals.
Finally the hourly chart below shows the development in even more detail.
Above: Pound-to-Dollar rate in June and July 2018.
In the hands of a competent analyst and trader Elliot waves are considered by many to be a reliable method for forecasting price moves.
In 1984 the Elliot wave expert and author of "The Wave Principle", one of the leading texts on Elliot Wave analysis, Robert Prechter won the US trading championship in options with a stunning 444% gain. The next closest competitor showed an 84% gain.
Nevertheless, Prechter hasn't always been right: he famously called for a continuation of the great bear market after stocks bottomed in 2009, when instead stocks rallied to new highs.
Advertisement
Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here