This week the pound moved towards the upside as expected confirming the main count and the pound fell short of the specified target by 15 pips.
The recent upwards movement is highly likely complete and this week`s count explores the possibility of a downwards reversal and what supports that view from an Elliott wave perspective. We are updating the main count according to the latest price action adding tight invalidation points and targets.
8-Hours Main Count
– Invalidation Point: 1.6604
– Confirmation Point: 1.6348
– Downwards Targets : 1.6281 — 1.6162
– Wave number: iii orange
– Wave structure: Motive
– Wave pattern: Impulse
Elliott Wave chart analysis for the GBPUSD for 3rd January, 2014. Please click on the charts below to enlarge.
Main Wave Count
This count expects that wave 4 maroon is likely complete and that wave 5 maroon is starting to unfold towards the downside.
Wave (E) black unfolded as a zigzag labeled waves A, B and C blue.
Wave C blue unfolded as an impulse labeled waves i through v pink.
Wave iii pink unfolded as an impulse labeled waves (i) through (v) green and this count expects that wave iv pink is complete as a triple zigzag and that wave v pink is starting to unfold towards the upside.
Wave iv pink unfolded as a triple zigzag labeled waves (w), (x), (y), (x) and (z) green.
Following the completion of wave iv pink wave v pink is expected to be complete as an ending diagonal labeled waves (i) through (v) green with wave (iii) green unfolding towards the upside as a zigzag labeled waves a, b and c orange.
Within wave 5 maroon waves i and ii orange are likely complete and wave iii orange is unfolding towards the downside.
As far as MACD study goes, MACD readings are showing that the end of wave (iii) green within wave iii pink registered the highest reading and as well showing the presence of a divergence between wave iii pink and wave v pink which is typical of a fifth wave and that augments the main count`s view and suggests a downtrend reversal in an impulsive or even in a corrective manner.
This count would be initially confirmed by movement below 1.6348.
At 1.6281 wave iii orange will reach equality with wave i orange and at 1.6162 wave iii orange will reach 1.618 the length of wave i orange.
This count would be invalidated by movement above 1.6604 as within wave 5 maroon no second wave may retrace more than 100 % the length of the first wave and it should be noted that the invalidation point will be moved to the end of wave ii orange once we have confirmation on the 8 hours chart that wave iii orange is unfolding towards the downside.