The British Pound has been in a strong and persistent decline since February, but that trend is overdue for a pause and maybe even a bounce. Here we chart it via the CurrencyShares British Pound Sterling Trust (NYSEARCA: FXB).
The Pound is still following the basic plan we showed in January, working its way downward in what appears to be the terminal wave [v] of an impulsive decline that began in 2014.
Inside wave [v], the downward count of sub-waves (i) and (ii) is essentially the same as what charted in the previous article, although the final stages of wave (ii) reached slightly higher than we expected.
Cover photo: Niest Point, Isle of Skye
The rapid decline since February is consistent with a third wave, and we have drawn two scenarios for the end of sub-wave (iii). Our main scenario is shown with gray labels, and it would have FXB reach a bit lower to test 115.08 or possibly 113.13.
However it is also possible to count sub-wave (iii) as already complete with its test of nearby support at 116.84. That’s the alternate scenario shown with blue labels.
The correction that would count as sub-wave (iv) could appear as either an upward or sideways pattern, and the resistance at 119.38 or 121.43 would probably contain it on the upward side.
We would prefer not to see FXB reach above the resistance at 122.88. If price exceeds that level, it would increase the prospects for the Pound low already being complete. The highest place where bears could still regain their footing with this wave count is at 123.72.
Price should eventually reach lower than the supports we mentioned for sub-wave (iii), but that move might not begin until late 2019 or sometime in 2020. In the meantime, bearish traders should manage their existing positions, and some traders might look for relatively quick bullish opportunities.
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