Bearish Triangle On USD Index Can Support GBPUSD – Elliott wave analysis
USD index is trading sideways for some time now, ideally unfolding an Elliott wave triangle correction in wave B that is part of a three-wave corrective decline. A triangle is a continuation pattern, which has five legs in a sideways range, so breakout is expected to occur lower after A-B-C-D-E sub-waves: ideally into the same direction as previous wave A.
At the moment we see price making an intra-day decline, however this may not be part of a wave C yet as waves D) and E) are still ongoing, meaning one more rally can be seen, before real bears take price lower and finally cause the breakdown.
USD Index, 4h
Well, if USD Index is headed lower after that pattern unfolds, then cable can see more upside from current supports. In fact, on a daily chart of GBPUSD we see price in a possible higher degree recovery that should be made by three waves. Ideally, this recovery is missing a third leg up, which may resume from current 50.0 and 61.8% Fibonacci levels, so wave B can be ending.
GBPUSD, daily
An Elliott Wave Triangle Formation
A Triangle is a common 5-wave pattern labelled A-B-C-D-E that moves countertrend and is corrective in nature. Triangles move within two channel lines drawn from waves A to C, and from waves B to D. A Triangle is either contracting or expanding depending on whether the channel lines are converging or expanding. Triangles are overlapping five wave affairs that subdivide 3-3-3-3-3.
Triangles can occur in wave 4, wave B, wave X position or in some very rare cases also in wave Y of a combination.
An example of a symmetrical triangle in a downtrend:
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