So far this year, the GBP/USD has made significant progress to the upside and the reason was firstly weak USD as speculators thought that FED is nearing the end of a hiking cycle, and of course strong pound as investors thought that BoE will have to be more aggressive with hiking policy as their inflation has been around 10% earlier this year. However, inflation finally came down recently, so the pound has seen a turn lower as well.
Looking at the cable Elliott wave analysis, we think the fifth wave’s potential for further growth appears limited due to its final leg within a higher degree impulse, as evident on the daily chart. Interestingly, there have been instances of sluggish price movement and overlaps around the 1.23 area at the start of May.
It was an ending diagonal that caused a sharp turn in price. So far we can see the pair coming back to the 1.2300 area, retracing the whole fifth wave as shown on the 4h chart so it seems that bears are in progress and that more weakness can be seen after wave 2 which is now still in play. Resistance is at 1.2470-1.25.
