The Pound Sterling is back below 1.3350 on Tuesday after Monday’s massive decline. The following November 24 GBPUSD Elliott wave analysis shares some technical insights.
The market is getting more directional this week than the last one. The dollar was back on its feet on Monday after better than expected PMI data. Sterling fell sharply to 1.326 after an initial rally close to 1.34 was initiated by Brexit optimism and good UK PMIs. Similar structure is building on Tuesday. The Cable started the day bullish on the back of the optimism that lockdowns will be lifted in the UK by next week. However, it has started to plummet and erase all the earlier profits as the dollar bounced again. A top seems to be building for a potential fall across all the GBP pairs.
Key drivers – FOMC and Brexit
A lot will be centered around the dollar performance and the Brexit deal as we head into the final weeks before the December 31 deadline. The Fed report on Wednesday should add momentum to the buck and all the major FX pairs. More easing as expected from the Fed will most likely weigh on the dollar and cause a sharp decline. However, if the Fed disappoint by holding further, the safe-haven dollar should start a fresh surge across the board. GBPUSD has resistance at 1.34 and 1,348 which should easily be taken by another bearish USD. On the other hand, supports at 1.31 and 1.285 will be tested or broken in the case of further USD resurgence.
Aside the FOMC on Thursday, spotlights will be on Brexit headlines. Both sides remain optimistic. However, reports continue to surface that some key issues are yet to be addressed. Will both sides agree to a deal before December 31? Will it be done quick enough so as to allow the outcomes to be vetoed by their different legislative bodies? A deal Brexit seems to be more priced-in than a no-deal. Therefore, breakdown in talks will cause a devastating bearish effect. Traders should watch out for these two events as we head into the second half of the week.
November 24 GBPUSD Elliott wave analysis
The market has built on the bullish move that started around late September. However, the move remains corrective. In the last update, we used the chart below to suggest the correction could have ended at 1.331.
However, the dip that followed was insufficient. The price therefore took one more push toward 1.34. At this stage, the correction seems to be overstretched. Price pattern is now evolving into a leading diagonal pattern as the November 24 GBPUSD Elliott wave update below shows.
A break below 1.326 should confirm a possible corrective decline to 1.3 or 1.285 in the short term. Further rallies above 1.34 should then follow especially if Brexit deal happens