Most currencies didn’t do well against the US dollar last year, but few did worse that the British pound. GBPUSD was hovering around 1.3530 at the start of 2022. Alas, high inflation coupled with Liz Truss’ short-lived cabinet’s economic illiteracy pushed the pair to an all-time low of 1.0360. The only way to get out of a situation like this is up.
GBPUSD closed at 1.2100 the first week in 2023. Up 16.7% from September’s low. The UK inflation appears set to plateau, while the Eurozone and US have seen their inflation drop. All of this is good news for the pound. It is however difficult to base trading decisions upon macroeconomic factors. That’s why we prefer using Elliott Wave analysis.
Similar Elliott Wave setups are also found in crypto, commodity and stock markets. You can learn how to spot them in our Elliott Wave Video Course!
The 4-hour chart of GBPUSD reveals the structure of the pair’s recovery from 1.0360. It seems like a five-wave impulse pattern. Waves 1 through 4 are in place. Wave 2 is a running flat adjustment. Wave 3 is extended and its five sub-waves are labeled i-ii-iii-iv-v, where wave ‘v’ is an ending…