The GBP/USD remains in a downtrend despite yesterday’s bullish momentum. The impulsive price action however could indicate a larger reversal if price manages to stay above a key support level.
The GBP/USD needs to stay above the green trend line if it wants to confirm a bullish wave A (blue) as part of a larger ABC zigzag pattern. A bearish break below this line could indicate a larger bearish push lower and a retest of the previous bottom and perhaps channel support (blue).
The GBP/USD could be building a 5 wave (green) pattern within wave A (blue) if price manages to stay above the top of wave 1 (green line). A break below it could either mean a new downtrend or a that the bullish 5 waves were already completed at the recent high. Price is now challenging the Fibonacci levels of wave 4 vs 3 (green) which could be bouncing spots if price is indeed in a wave 4. The confirmation of a potential wave 4 occurs when price is able to break above the resistance trend lines marked in the chart by a red and orange line. In that case a wave 5 of wave A could be starting.