The Pound Is Still Poised to See Lower Levels

Focus: STRATEGIES

Michael Golembesky Image Michael Golembesky Analyst, ElliottWaveTrader
As we are still trading well under the larger degree resistance zone, this modification does not change my bigger picture view on GBP/USD. And the 1.3012-1.3303 resistance zone is still acting as a significant inflection zone.

Additionally, the move back up off of the June 20 low is now providing us with not only a much more simple way to count the sub-divisions within this fourth wave but a much better short side setup than we had the last time that the pound had tested the lower end of the long-term resistance zone.

This bearish setup triggers upon any move back over the May 18 high, which comes in at 1.3047 prior to breaking down below the June 20 low at 1.2588 and ideally I would prefer this high to be made while holding over the 1.2692 level. If all of these things can fall into place, then we will have what can be counted as a completed Ending Diagonal pattern.

Follow through on this pattern should then result in a sharp reversal back down towards at least the January lows at 1.1985 and eventually back under the 2016 lows and closer to par against the US dollar on a longer term timeframe.

So while there is no question that the action has been somewhat sloppy on the pound vs. the U.S. dollar as of late, my larger degree perspective on this pound remains unchanged. I will continue to look towards lower levels over the next several years as long as the GBP/USD does not see a sustained break of the longer term resistance zone.

See charts illustrating the wave counts on the GBP/USD.

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