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GBPUSD: Headed Back to 2.00

Thursday, 24 January 2008 14:30:27 GMT

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Written by Jamie Saettele, Technical Currency Strategist
This is an update to the GBPUSD Explosion article from January 16th. After falling nearly 2,000 pips from the November high, it is likely that the bottom at 1.9337 will hold for a number of weeks. The rally underway from this level, although viewed as countertrend in the bigger picture, should see at least 2.0100.  

01-24-08SPECIAL1

The weekly line chart (closing prices) is interesting because the decline from 2.1160 is clearly in 5 waves when viewed in this manner.  This means that the larger trend is now down and that at least one more decline (similar to the one that occurred the last few months) will occur.  This decline is either wave A or wave 1 in 3 or 5 wave bearish cycle.  Either way, a corrective rally is expected to unfold.

01-24-08SPECIAL2

The 240 minute chart is a close up view of the 5 wave decline.  The decline does count nicely as a 5 wave affair and, as mentioned, a corrective rally is expected and is probably in its early stages now.  Price is expected to reach at least former resistance near 2.0100 (also the 38.2% of 2.1160-1.9337 at 2.0033).  The 200 day SMA reinforces resistance at 2.0150. As the pattern unfolds, we will be better able to pinpoint when the next decline will start.  This rally will probably last for at least the next few months but could be choppy (since it is corrective).

Be sure to visit the Elliott wave forum for more trade ideas.

Take a look at the SSI report to see how sentiment is setting up for the GBPUSD.

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