GBPUSD rejected rallies above 1.3 and now off to 1.2875. The following 20 October GBPUSD Elliott wave analysis share some technical insights.
October 20, 2020 / AtoZ Markets – Despite a falling USD, GBPUSD continues to struggle to build on the bullish block. Uncertainty around post-brexit trade deal with lockdowns and restrictions in some parts of the UK set the Sterling back. While the bullish correction from 1.2675 seems not have been over yet, the Cable could hit 1.2878 on the short-term, However, further rallies toward 1.32 is high on the cards as the market expects the trade deal to go through despite delays. US politics togerther with the November 3 presidential election, the US stimulus package and Covid remain the major risk driver for this currency pair.
The USD has tanked this week so far. The bearish dive continued on Tuesday. This came as a result of reports surfacing that Democrats and Republicans are close to agreeing on the stimulus talks. This put so much pressure on the dollar as expected. DXY plummeted to 93.25 . While USD weakness shows across the board, GBPUSD head sideways. The brexit uncertainties and disappointment offset what could have been a bullish GBPUSD in the short term. Brexit further talks are yet to resume. At the same time, PM Boris is set to put some part of the UK under restrictions as a result of Covid resurgence.
20 October GBPUSD Elliott wave analysis
GBPUSD started the new week above 1.29 and progressed above 1.3 on Monday. However, a sharp decline followed before the market opened on Tuesday. The price is currently challenging the 1.29 psychology level and would most likely touch 1.2875 or prices close to it before buyers can look for the next opportunity. Based on the Elliott wave theory, GBPUSD is completing the second leg of the bullish correction from the 1.2678 low. We used the chart below in the last update.
The chart above labelled the correction to have completed. The price afterwards hit the 50% Fibonacci retracement level and fell sharply. However, the resultant move turned corrective instead of being impulsive As the new 20 October 20 GBPUSD Elliott wave analysis below reveals, the currency pair is completing a triangle pattern. This made us to suggest that further rallies would follow.
At the end of the triangle pattern, the second leg of wave 2 should propel further surge above 1.31. This should happen especially if the brexit talk resume and there is enough optimism that a deal with go through. This should complete before the November 3 US presidential election. On the other hand, a breach below 1.287 would invalidate the triangle pattern and force us to reconsider a deeper bearish wave b corrective pattern.