It’s been over a year since Liz Truss’ mini-budget plunged GBP/USD to under 1.0400 in September 2022. The Pound Sterling is looking much better now, trading above 1.2700 and on track to finish 2023 in positive territory. For a currency, which has devalued by as much as 40% against the US dollar since 2007, this is no small feat. It wasn’t a smooth ride, though, as the pair barely held above 1.2000 just two months ago. Assuming no major external shocks this month, the bulls should celebrate at the end of December. What can we expect in 2024? This is the subject of this article.
The 4-hour chart of GBP/USD reveals the structure of the recovery from 1.0360. It consists of two parts – motive and corrective. The motive one involves a five-wave impulse up to 1.2448 in January, 2023, labeled 1-2-3-4-5 in wave (1/A). Wave 2 is a running flat correction, followed by an extended wave 3, whose five sub-waves are also visible. Wave 5 exceeds the top of wave 3 by just a pip.
The end of wave 5 of (1/A) marks the beginning of an A-B-C running flat retracement in wave (2/B). This is the corrective phase of the Elliott Wave cycle on the 4h chart of GBP/USD. Wave A is a simple a-b-c zigzag with a triangle in wave ‘b’. Wave B is also a zigzag, where the impulsive structure of wave ‘c’ is marked i-ii-iii-iv-v. Wave C then dragged the pair to 1.2037 in October, where the entire pattern seems to have ended.
If this count is correct, the uptrend has officially resumed and we can anticipate much higher levels in GBP/USD going forward. Not only should the bulls exceed the top of wave B at 1.3142, but they can also go for the resistance near 1.4000 in the months ahead. All told, 2024 looks promising, especially given the high probability of interest rate cuts in the US.
