GBP/USD Remains In Downside Supercycle

Long-Term GBP/USD Trend AnalysisThe GBP/USD has decreased almost tenfold over the past couple of decades. It reflects the shift of superpowers. The USA has taken over the leading role from Great Britain over this timeframe. This is valid in an economic and also geopolitical sense.

Going forward, we anticipate the Supercycle trend to persist. A drop of the cable below its levels in the 80’s is likely. Cycle wave IV shows a simple 3-wave structure, which took a total of 22 years. Moreover, the subsequent drop looks impulsive. Especially the simple 3-wave move is important for our case here. It got confirmed as price action went below its b-wave low.

Is it possible that we have seen the low in the 80’s already? This is unlikely. The cable needs to develop a leading diagonal from that bottom. Moreover, the bounce from the 2016 bottom counts as a zig-zag or zig-zag combination as well. Leading diagonals at multiple degrees are possible but very rare.

Supercycle Trend

On the medium-term timeframe, the GBP/USD is close to completing or has already completed a 4th wave. It is either of primary or of intermediate degree. The bounce since the 2016 low shows a deep retracement and makes a primary degree diagonal more likely. An intermediate degree 4th wave is possible but lower odds.

We expect continuation along the long-term trend to the downside. Primary wave 5(circle) and cycle wave V still need completion. As of today, we count 7 waves down from the 2014 top. That’s an incomplete Elliott wave pattern. It calls for followthrough to the downside. Our GBPUSD forecast is below the levels the cable saw in the 80s. It reflects a continuation of its Supercycle trend.

Midterm Trend

The short-term GBPUSD Elliott wave pattern counts as a (nearly) terminal structure to the upside. The key takeaway is how price action since 2016 fits into the Elliottwave framework. It works as zig-zags or combination of zig-zags only. We’ve seen many other different versions flying around but all of them were in conflict with Elliott’s rules.

The pattern may certainly morph into a leading diagonal but some steep retracements to the downside are necessary to perform this transformation. Forecasting a leading diagonal is reckless at this stage. This is especially valid if the medium- and long-term GBPUSD Elliott wave structure is taken into account.

Hence, the cable’s wheels will probably come off very soon.

Shortterm Trend

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