The Sterling is pointing downside in the middle of the US election result update. The following November 4 GBPUSD Elliott wave analysis looks at the technical side.
November 4, 2020 / AtoZ Markets – GBPUSD current rally from mid-September remains corrective. It seems to be a matter of time before the Cable returns downside toward 1.22 and 1.21. However, the very volatile events lining this week could mean that we would need the market to adjust to the volatilities that would follow. To the upside, a touch of the 1.33-1.34 top could still happen if the USD falls to push the GBPUSD bullish corrective structure further upside or even a total and near annihilation of the 1.3485 top.
Risk-on forced the dollar on a bearish path on Tuesday and over 100 million Americans were reported to have cast their votes before the election day. GBPUSD pushed to 1.34 as a result of the bearish USD and optimistic Brexit headlines. However, in the early hours of counting during the Asian session on Wednesday, GBPUSD dropped nearly all of the Tuesday gains. The price is now hanging between breaking above 1.318 and pushing toward 1.33 then breaking below 1.285 to lead to a wild bearish move. A lot will depend on the US election and the USD.
BREXIT, NFP and BOE
Later in the week, the Bank of England will release new monetary policies. On Tuesday, the RBA cuts rates to 0.1% and activated further easing to contain Covid. UK might also take this path giving that the government imposed a 4 weeks partial lockdown last week. Later on Friday, the NFP data could add further momentum. The market expects a lower inflation rate but lower new jobs in October compared to September.
Brexit remains a major concern as well. Negotiators expressed readiness to agree on deals by mid-November ahead of December 31 official exit deadline. Optimism around this is bullish for GBP pairs. However, a breakdown in talks beyond mid-November could be devastating for this currency as it could move us close to a no-deal Brexit.
November 11 GBPUSD Elliott wave analysis
In the last GBPUSD Elliott wave update, we expected the price to take one more leg to the upside. We anticipated a bullish double zigzag structure to 1.31 and even 1.32 as the chart below shows.
The price hit higher just as expected – 15 pips away from 1.32. However, a gradual dip followed last week to 1.285 before the Tuesday surge which came short of the 1.318 top. What next? The chart below shows the November 4 GBPUSD Elliott wave analysis.
Two scenarios here. If the double zigzag wave has ended at the 61.8% Fibonacci projection level, we should see a further decline below 1.85 low to confirm. On the other hand, further rallies could be capped below 1.3350 where we have the 100% Fibonacci projection level before a sharp decline follows. Downside targets are 1.22 and 1.21. After the US election, perhaps, we would get a much more assured outlook.