GBP/USD has dropped sharply, with price action consistent with a bearish impulse under Elliott Wave analysis. A break below the lower trend line of a bearish base channel is framed as a potential trigger for acceleration into wave three, which is typically an extended phase of the move. On that basis, the next downside zone being monitored is 1.3150–1.3000.
The analysis also allows for a wave-four pullback, or another corrective bounce within the broader decline, before any continuation into wave five. Overhead, resistance is placed between 1.3270 and 1.3360. A recording of a prior webinar discussing GBP/USD and other markets is referenced, and the piece is authored by Gregor Horvat, a Slovenia-based Forex participant since 2003.
Bearish Impulse and Trading Strategies
We see a strong bearish impulse unfolding for GBP/USD, signaling that derivative traders should prepare for a drop toward the 1.3150 to 1.3000 range in the coming weeks. This downward momentum is gaining traction as the currency pair breaks below its key base channels, indicating a powerful wave-three acceleration. To capitalize on this trend, we suggest establishing short positions or purchasing put options on corrective rallies.
Economic Context and Risk Management
This bearish technical setup aligns with recent economic shifts, including the Bank of England’s recent move to lower its benchmark interest rate to 5.00% to combat cooling inflation. Historically, when the British pound breaks below major base channels during monetary easing cycles, the market often experiences rapid declines of 1.5% to 2% within a few weeks. We believe utilizing bearish put spreads will allow traders to limit their risk while positioning for this projected downward move.
However, we must remain prepared for short-term wave-four corrective bounces before the market resumes its downward trend. Strong resistance is currently concentrated between 1.3270 and 1.3360, which serves as a strategic zone for placing sell-limit orders. We should monitor these resistance levels closely to refine our entry points before the market makes its final move lower.
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