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GBP/USD And The Art Of Reversal Prediction

Published 05/08/2016, 07:29 AM

GBP/USD climbed to 1.4770 at the start of last week, but quickly lost momentum, allowing the bears to take the wheel and sink the pair to 1.4414 on Friday, May 6th. The rate has been in an uptrend since the start of April so the initial rally could be expected. But what about the bearish reversal, which followed? Predicting reversals is probably the most tricky and difficult, but often crucial thing in trading. However, difficult does not mean impossible. The next chart was received by our premium clients on Monday, May 2nd, before the markets opened.(some of the marks have been removed for this article)
GBP/USD 4 Hourly Chart

As visible, the Elliott Wave Principle suggested GBP/USD’s uptrend is either over or near completion. The wave count was pointing to the fact that the bulls are running out of steam. Our premium clients have been told that “the upper line of the channel could be expected to coincide with the termination point of wave … and give the start of the next major decline…” Everything we needed to make this forecast was provided by the above-shown chart and the Wave principle, which is the analytical method we use and rely on. Here is how the situation has been developing last week.


GBP/USD 4 Hourly Chart II

The market chose an ending diagonal pattern for wave 5, causing the pair to slightly breach the upper line of the corrective channel. Nevertheless, the bulls quickly gave up and the bears took over. The upper line of the channel really did coincide with the termination point of GBP/USD’s recovery. This is an excellent example of one of the Elliott Wave principle’s most valuable features – the ability to help traders correctly anticipate reversals, which not only saves them a lot of money, but could also prepare them for the next major move in the market.

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