GBPUSD continues to decline after reports of a hard Brexit hit the market. The following GBPUSD Elliott wave analysis shares some technical insights.
December 19, 2019 | AtoZ Markets – The last week election in the UK further ignited Brexit optimism. GBPUSD rose quickly to hit a new multi-month high. The currency pair hit 1.3515 while other GBP pairs also gained massively. However, all of the gains after the election is now gone. UK PM Boris is committed to getting Brexit done in 2020 even if it means to leave without a deal. This is also known as ‘Hard Brexit’. The no-deal scenario is painting a bearish picture on the market. The dip started on Friday with a 150 pips loss from 1.3515. However, after a minor recovery to 1.342 on Monday, the market slumped further and hit 1.3050 on Thursday after a negative retail sales data. The currency pair is expected to touch 1.3 this week or early next week.
BOE keeps monetary policy unchanged, Queen’s speech and PM Boris’ new bill
On Thursday, the BOE decided to keep its monetary policy unchanged. The Cable, therefore, remained rooted below 1.31. Perhaps the market is more concerned about the Queen’s speech today. The monarch will outline the PM’s agenda for 2020. In addition, the Prime Minister will also introduce his Brexit agenda which will include the Withdrawal Agreement Bill today. Therefore, there is enough for the market to react to. However, if more emphasis is laid on an exit without a deal, the GBPUSD price will plummet further. USD’s recovery this week as a result of the phase one trade deal agreement between the US and China has also added to the bearishness of GBPUSD. We will have to see how the market reacts to post-Trump-impeachment and new trade headlines.
GBPUSD Elliott wave analysis
It is now clear that the dip from 1.3515 is the start of the bearish correction of the impulse wave rally from 1.196. A 3-wave bearish correction to 1.274 or even 1.255 is now very much likely. In the last update, we had two scenarios. The first suggested the 5th wave of the impulse wave rally should be much extended toward 1.382. However, the current dip, expected to be the 4th sub-wave of the 5th wave has gone deeper than necessary. The GBPUSD price chart below shows the 2nd scenario as we had it in the last update (Charting tools from TradingView).
Wave (a) has now extended to 1.304. Wave (a) is completing the internal impulse wave pattern as the chart below shows. This means that we can expect a zigzag bearish correction below the 1.3 critical level.
Wave (a) might complete around the 1.3 level. Swing bearish position will be good at the end of wave (b). Wave (c) should hit 1.275 or even deeper at 1.255.