The British pound is falling sharply for the past two weeks from 1.6180 (January 11 swing high). Notice that the decline from that high can be easily counted in five waves. That’s called an impulsive structure which represents a huge red wave 3) which is part of much bigger five wave decline started back on January 2nd.
Therefore we expect much deeper levels on cable, but not just yet. In fact, we think that before market breaks lower again we will see a corrective bounce in wave 4), ideally back to 1.5800-1.5900 range before a new sell-off begins.
The pair is also approaching some strong Fibo support for current third wave; its 1.618 x wave 1) measured from wave 2) high which very often reacts as a turning point at the end of a third wave. In our case that’s comes in at 1.5650. Bottom line: watch for a corrective bounce in 100-200 pips before new leg lower.
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