Bearish Triangle On USD Index Can Support GBPUSD – Elliott wave analysis

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The 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 a breakout is expected to occur lower after A-B-C-D-E subways; ideally in 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 causes the breakdown. 

USD Index, 4h

Well, if the USD Index is headed lower after that pattern unfolds, then cable can see more upside from current supports. In fact, on a daily chart, we see price in a possible higher degree recovery that should be made by three. And ideally, this recovery has a missing third leg up, which may resume away from current 50.0 and 61.8% Fibonacci levels, so wave B can be coming to an end. 

GBPUSD, daily

An Elliott Wave Triangle Formation

A Triangle is a common 5-wave pattern labeled A-B-C-D-E that moves counter-trend 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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About Author

Grega Horvat Grega is based in Slovenia and has been involved in markets since 2003. He is the owner of Ew-Forecast, but before that he was working for Capital Forex Group and TheLFB.com. His feature articles have been published on FXstreet.com, Thestreet.com, Action forex, Forex TV, Istockanalyst, ForexFactory, Fxtraders.eu, Insidefutures.com, etc. He recently won the award on FXStreet.com for Best Forex Analysis in 2016. At Ew-forecast he helps clients and educates them about the Elliott wave principle and how to label and track unfolding patterns in real time. His approach to the markets is mainly technical. He uses a lot of different methods when analyzing the markets such as candlestick patterns, MA, technical indicators etc. His specialty, however, is Elliott Wave Theory which could be very helpful especially if you know how to use it in combination with other tools/indicators. EW-Forecast To be involved in the market effectively, you need the right guidance and resources, and our team can help you to achieve that. Our team is providing advanced informations about Elliott Wave theory in real time. The Elliott Wave Principle gives you a method for identifying the behavior of the markets and at what points the market is most likely to turn. We help new traders who are interested in Elliott Wave theory to understand it correctly. We are doing our best to explain our views as simple as possible with educational goal, because knowledge itself is power!