Main Elliott Wave count of GBP currency basket against 16 other currencies (EUR, USD, GBP, CHF, JPY, CAD, AUD, NZD, CNH, DKK, MXN, NOK, PLN, SEK, SGD, ZAR, TRY).
Monthly Chart
The monthly chart shows a quite clear structure that can easily be counted in 5 waves, from the high down to the late 2016 low. However, after price stalled at the first high in April 2018 the price action has gone sideways in a multiyear range. Not until August 2023 did we see price break out of the range, but the first attempt failed.
A new attempt this year (-24) seems to be more successful and what’s more is that the move up from the 2022 low can be counted in 5 sub waves. This means, on condition that wave (5) really has completed, we should expect a 3 waves correction. This will most likely mean a move back down for a final test of the range breakout and maybe back into the range as well.
In case wave (5) were to extend higher before the correction truly sets in, the latter scenario would be less likely. However, with 7 subsequently monthly closes outside of the range it would probably take something extra to keep it there more than a brief period, likely less than a month.
The monthly AO indicator is also supportive of a further move high, after the correction is completed.
Weekly Chart
While it can’t be excluded, I think it’s fair to assume that wave (5) indeed has completed, especially has price has dropped below the high of wave (3). However, it’s important to observe that price would never take notice and move based on what Elliott Wave setup that is at hands. Nevertheless, there is still some room left to the upside but it’s limited.
I think it’s better to focus on where price possibly could go to find support. The area where wave (4) ended seems to be a jolly good candidate, because
1.) It is a well established location based in the Elliott waves guidelines, but more importantly
2.) We have a whole lot of trading within a narrow range just inside the main range, building a solid support structure in my view.
3.) Maybe less important but still serving as confluence, we also have a 38.2% Fib level there, based on the Weekly Open (not low) the bottoming week and the high.
What possibly weights against it is that it would be a relatively shallow correction, but if price moves from there with speed it could instead be a very bullish sign.
The fact that price at the same till will fall out of the channel it has been rising within, isn’t such a big let-down and in my view merely serves as a sign that the wave has completed.
We can also see and get this confirmed on the Daily chart. We can count 5 sub waves up and in rather classic wave 5 manner, price is rising slowly and without very clearly market wave swings – but they are there.
Conclusion
The Pound Sterling certainly has a lot of upside potential but has now arrived where a correction may be warranted. We should wait for that correction to play out before committing any new and longer-term GBP engagements. On shorter time frame there are of course always opportunities, in both directions.