It has been a wild ride for GBP/USD this week. The pair initially opened with a huge gap to the downside, following Theresa May’s “Hard Brexit” comments, but then reversed to the north to climb from as low as 1.1987 on Monday to as high as 1.2414 on Tuesday. It turned out that those, who followed the news and sold GBP/USD in pre-market were proven to be dead wrong by the illogical, but violent bullish swing that followed. However, our premium clients do not have to blame Theresa May for anything, because they have been warned that “the short-term charts suggest a recovery to 1.2430 is underway.” The next chart, in particular, was sent to clients before the market opened on Monday, January 16th.(some marks have been removed for this article)
As visible, our Elliott Wave analysis suggested that GBP/USD might decline a little more in wave “b” of (b), but it was definitely not a time to sell it, because wave “c” of (b) was then supposed to lift it to the resistance area of wave 4 of (a) – above 1.2400. Today is Thursday and it is time to see how that forecast played out.
Think about the following paradox. GBP/USD plunges by nearly 18 figures on the day of the Brexit referendum, but rises by more than four after May’s promise to make Brexit as hard as possible. It does not make any sense, does it? Well, it does, at least according to the Elliott Wave Principle. Of course, it cannot tell you what someone is going to say, but it can often help you anticipate the market’s reaction to whatever is being said. And, in our opinion, this is much more important. Just ask Monday’s GBP/USD bears.