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Chart of the Day Update:
Cable: Bearish reversal in Progress
The U.S. dollar showed a mixed reaction today in the European session, when the EUR/USD reached a new weekly high of 1.5140, while the pair GBP/USD fell into a Short corrective pull-back as discussed yesterday.
Traders may also notice that the S&P futures failed to break through resistance around 1115 zone as prices reversed sharply from that level after the first 30 minutes of Wall Street trade. This seems to be a quite important level ahead of the Non-Farm Payrolls.
Traders that were monitoring the major pairs closely, may have noticed that one of the weakest currencies against the U.S. dollar was the Pound, which fell sharply for 160 pips from the 1.6722 high. The charts below show that Euro and Aussie are trading relatively higher compared to the Cable.
TheLFB Charting: Overlay chart 30 min (Euro, Aussie, Cable)
We have updated yesterday's GBP/USD chart below and can see that the key for this 160 pip move was the support line with a breakout point at 1.6680. This short move looked very impulsive as prices made a sharp move in a relatively short period of time. With this being said, we believe this was the first part of a larger decline that may follow over the next few trading days. As such, we have labeled this as a Short black wave A/1 with waves B/2 and C/3 to follow.
TheLFB Charting: GBP/USD 30 min Elliott Wave view
Currently, the market is searching for the bottom in a Short black wave A/1 leg, which may happen somewhere around the 50% retracement level, at 1.6550. If we are correct then a pull-back into a Long wave B/2 should follow in the near-term, before the down-trend in wave C/3 continues.
The current price action does not offer any good trade set-ups, which may change once the pull-back in wave B/2 appears.
Wave count with a near-term bearish expectation remains valid as long as the market trades below the 1.6720 highs.
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