Don’t expect the quiet conditions of the last few days to last much longer as an interest rate announcement from the FOMC takes place later today. Emotional impulses generated from the herding mentality that exists in free markets is what creates recognizable price patterns. Price action; before, during, and after big events such as the one later today often results in extremely clear patterns because emotion surrounding the market is elevated. The pattern in the GBPUSD is clear and presents an opportunity for short term traders.
We are treating the decline from 2.1160 as wave A or 1 in a 3 or 5 wave bear cycle. The rally underway now is either wave B or 2. This countertrend rally should eventually challenge 2.0100 and maybe 2.0463 (61.8%). However, countertrend rallies unfold in 3 waves (A-B-C) and wave A is probably complete (we will show why on the next chart). We focus on the GBPUSD in the Elliott Wave forum so be sure to visit us for more ideas.
As mentioned, a top for wave A might be in place at 1.9949. Wave 5 of A appears to take the form of a diagonal (overlapping waves) and diagonals are usually fully retraced. In this case, the origin of the diagonal is close to the 38.2% of 1.9337-1.9949 at 1.9715. The next move is towards this level.
