It has been an interesting week in the forex market. The most violent price movements were in the euro pairs, following the ECB’s policy statement, but GBP/USD received its share of volatility as well. The pair initially fell to as low as 1.4117, but then rallied sharply up on Thursday. Right now, it is flying above 1.4430. But we are not going to discuss how and why the markets digested Mario Draghi’s speech in that way. You can read tons of these explanations elsewhere. The question which we believe is much more important, is could GBP/USD’s reaction be predicted, before the ECB’s announcement? Our answer is YES, and the next chart proves it.
This chart was sent to our premium clients on March 7th. It shows that GBP/USD’s recovery from 1.3835 was a 5-wave impulse. According to the Elliott Wave Principle, every impulse is followed by a 3-wave correction in the opposite direction, before the trend resumes. That is why our premium clients received the following guidance: “wait for a three-wave retracement, corresponding in size to the … impulse, and go long” and then “the exchange rate is likely to climb to the area between 1.4400 and 1.4500…”
Now let’s see how the situation has been developing throughout this extremely interesting week. The next chart shows how GBP/USD looks like today.
As visible, the 3-wave a)-b)-c) correction we have been waiting for, developed as an expanding flat correction with a triangle in wave b). As soon as wave c) breached the bottom of wave a), the correction was over and the uptrend resumed according to plan. With the pair already trading within the target area between 1.4400 and 1.4500, we can say GBP/USD gave us another excellent example, showing why we have chosen the Elliott Wave principle as our forecasting method.
Why not give it a chance too?