GBPUSD spiked above 1.25 on Wednesday to hit its highest price in almost a week. The following technical insight is based on the Elliott wave theory.
July 24, 2019 | AtoZ Markets - The Sterling spiked upside on Wednesday as the UK get ready for PM Boris. There were waves of optimism after the new PM won Tuesday's election. The Cable was expected to pick to the upside. However, the price quickly surrendered the gains a few hours after.
PM Boris is set to take over the UK top office today and announce his team. The market was upbeat and GBPUSD quickly rallied. In just about four hours, the price gained 84 pips to hit 1.252. This now means that price stays between two critical levels which are very important to the near-term direction of the Cable.
GBPUSD Analysis: important price levels
To the upside, price is now close to the 1.256-1.258 resistance zone. A break above this zone might lead to an attempt to hit the 1.265-1.2785 resistance zone. To the downside, 1.242 and 1.238 are the nearest support levels. Price is expected to stay above 1.242 if the current idea of a bullish correction will get real. From a technical perspective, the long term direction is bearish. On the intra-day time frame, it seems a bullish correction has commenced. There are also some technical bullish reversal patterns to take note of.
GBPUSD Elliott wave analysis: short and long term forecast
From the long term period, the Cable is bearish and still remains in the southward territory. In the last update, where the chart below was used, a diagonal pattern was spotted emerging on the weekly chart.
The bearish pattern could continue to 1.1 in the long term. This means that the Cable might still be bearish throughout 2019 and a larger part of 2020 before the long term bullish correction returns. Events that will call for these are not known yet. We will have to see how all these play out. In the last update as well, we expected ''a bullish move toward 1.29'' before the bearish trend continues. The chart below shows the short-term forecast.
A simple zigzag pattern from 1.3385 to 1.238 seems to have completed with an ending diagonal pattern. The swift rally is typical of how price reacts to this pattern. In addition, an inverted head and shoulder with neckline at 1.256-1.2575 is about to complete. A break above the neckline could see the Cable advance toward the 1.28 resistance level