GBP/USD Elliott Wave: Wave 1 of 3 Nearing Completion

GBP/USD Elliott Wave Analysis

GBP/USD continues to motor higher in broad based USD weakness. Since bottoming in January, the current rally is a large degree third wave that has plenty more upside available.

From the daily price chart, it appears the current Elliott wave is (v) of ((i)) of 3. For those unfamiliar with Elliott Wave Theory, the 3rd wave needs 5 waves. Cable is nearing the end of the 1st of those 5 subwaves for a larger wave 3. This implies plenty more upside available though the largest correction since January is just around the corner.

Our previous analysis, “2014 Resistance in Sight” from March 3, suggested a top in wave (iii) of ((i)) to appear near 1.28-1.29.

With the benefit of hindsight, we now know the wave (iii) top came March 12 at 1.2987.

For the rest of March, wave (iv) of ((i)) is carved. The rally witnessed today is a portion of wave (v) of ((i)).

GBP/USD Rally Projections

With today’s rally a portion of wave (v), that means it is an ending wave for a larger pattern wave ((i)).

This doesn’t mean the rally ends in the next couple of days. However, it does imply that the largest correction since January looms just around the corner in wave ((ii)) once the final prices are in place for (v) of ((i)).

We can use some tools to estimate where (v) may carry to.

Oftentimes, (v) has an equal or Fibonacci relationship to the length of (i). Additionally, the projection of (v) can be relative to the size of waves (i)-(iii).

Here’s a listing of those price targets in order:

Wave (v) = .382 x (i)-(iii) = 1.3231

Wave (v) = (i) = 1.3317

September 26, 2024 high = 1.3434

Wave (v) = .618 x (i)-(iii) = 1.3455

Wave (v) = 1.618 x (i) = 1.3601

Therefore, two clusters of pricing emerge as potential target zones for (v).

The first cluster zone is 1.3231-1.3317, or about 1.33.

The second cluster zone is 1.3434-1.3601, or about 1.34-1.36.

Bottom Line

GBPUSD is currently rallying in a multi-month wave 3.

However, the first subwave, wave ((i)) is about complete. We suspect it may finalize around 1.33 or 1.35-1.36. Once wave ((i)) is in place, then the largest decline since January kicks off in wave ((ii)) likely carrying back to 1.25-1.29.

Key Level for Bullish Bias: 1.25

Initial Target: 1.33-1.36

Secondary Target: 1.53 (longer-term)