Is GBPUSD Ready for an Upside Turn? Decoding the Final Downside Wave

Is GBPUSD Ready for an Upside Turn? Decoding the Final Downside Wave

The GBPUSD currency pair has showcased a captivating corrective movement that extended from 1.31424 to 1.25600, forming a sequence denoted as wave w-x-y-x-z. Our observation, posted on August 16, 2023, “GBPUSD Corrective Wave Patterns zigzag and flat” indicated the completion of wave w-x-y and the ongoing progress of wave x. Notably, wave x encountered a significant barrier within the resistance zone ranging from 1.28189 to 1.28200. This led us to recommend a cautious “sell on rise” approach, especially considering the prevailing Lower High – Lower Low structure.

GBPUSD hourly chart : Elliott Wave Analysis

Is GBPUSD Ready for an Upside Turn

Remarkably, the unfolding events have adhered closely to the earlier wave analysis. Each wave is adopting a structured 3-3-3-3-3 pattern. Following the w-x-y sequence, wave x confronted resistance within the predicted range, aligning with our expectations. Consequently, wave z embarked on a downward trajectory. Traders who employed a “sell on rise” strategy during wave x enjoyed profitable outcomes, capitalizing on the descending wave z.

As things continue, it’s super important to stay watchful. This is the last wave in the correcting pattern, which could mean a possible change in direction soon. To get ready for this shift, it’s a good idea to secure some profits by taking a part of your gains during this final wave. Using a carefully watched trailing stop loss strategy can also help protect your gains even more.

Right now, wave “z” has hit a low point close to 1.25600, a very important level of support. If this support is broken, the price might drop further, maybe even down to around 1.24100. Remember, I mentioned this before – when dealing with this last wave, it’s smart to make careful decisions and not get too greedy.

As we get closer to the end of this correcting cycle, being patient is really important. Waiting for a new trend to start going up is like starting a new cycle. When things change in the financial world, remember that making smart trading choices comes from a mix of understanding, planning, and the ability to adapt.

Frequently Asked Questions (FAQ) for Beginners

What is a Trailing Stop Loss?

A trailing stop loss is a dynamic type of stop loss order that automatically adjusts as the market price moves in a favorable direction. It helps lock in profits by maintaining a certain distance (usually specified in points or percentages) from the current market price. If the market moves in the trader’s favor, the trailing stop loss moves along with it, ensuring that if the price reverses, the trade is exited with a profit.

What Does “Sell on Rise” Mean?

“Sell on rise” is a trading strategy where traders aim to sell an asset when its price increases (rises) to a certain level. This strategy is often employed when a trader anticipates a potential reversal or resistance at that higher price. By selling at a higher price, traders attempt to profit from the subsequent decline that they expect to occur.

What is Lower High – Lower Low (LH-LL) Structure?

The Lower High – Lower Low (LH-LL) structure is a pattern commonly observed in technical analysis. It refers to a series of price movements where each subsequent high is lower than the previous high, and each subsequent low is also lower than the previous low. This pattern is often associated with downtrends and indicates a potential continuation of bearish momentum.

How Does Wave Analysis Work?

Wave analysis, often referred to as Elliott Wave Analysis, is a technical analysis method that attempts to predict future price movements based on patterns in market price charts. It divides price movements into impulse waves (trend moves) and corrective waves (counter-trend moves). Traders use these patterns to anticipate potential price directions, reversals, and trends.

What is a Correction in Trading?

A correction in trading refers to a temporary price reversal within an ongoing trend. It’s a counter-trend movement where prices move against the prevailing trend temporarily. Corrections can be either shallow (small retracements) or deep (larger retracements), and they provide opportunities for traders to enter or exit positions before the main trend resumes.

How Do Fibonacci Levels Play a Role in Trading?

Fibonacci levels are key support and resistance levels derived from the Fibonacci sequence. Traders use these levels to identify potential turning points in price movements. The common Fibonacci retracement levels include 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels are used to anticipate where price corrections or reversals might occur.

What Does “Fresh Trend” Refer To?

A “fresh trend” indicates the emergence of a new price movement direction. It usually follows a significant reversal or consolidation period. Traders look for new trends to capitalize on potential profitable opportunities after the market has undergone a transition from a previous trend.

Remember, trading involves risk, and it’s essential to thoroughly understand these terms and concepts before implementing them in your trading strategy. Continuously educate yourself and consider seeking guidance from experienced traders or professionals to enhance your trading knowledge and skills.

You may also like to read elliott wave analysis of Bitcoin (BTCUSD)

Happy Trading!

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