Bears eye 1.3780, near term

GBP/USD bulls have taken out near-term resistance around 1.3880-85. The single currency pair could be preparing for a corrective drop towards 1.3780 at least. A break below 1.3820 would accelerate further.

Bulls have remained in control of GBP/USD since the pair registered a low around 1.3600 mark on August 20. The pair has pushed towards 1.3890, taking out immediate price resistance around 1.3880 as marked on the chart here.

Further, the above rally has unfolded by subdividing into five waves, carving an impulse wave. The termination around 1.3890 is marked as potential Wave 1. Also, note that lower degree wave iii was an extension.

Ideally, an impulse wave should be followed by a corrective wave, which could be a zigzag or flat. If the above-proposed structure holds well, GBP/USD could resume a corrective wave lower towards 1.3780 and up to 1.3710-20.

High probability remains for an A-B-C corrective decline from the current price (1.3860), where Wave A potentially terminates around 1.3780-1.3800. The 38.2% Fibonacci retracement of Wave 1 is also passing through the 1.3780 zone, an ideal guideline for the above.

If the above structure unfolds accordingly, Wave C could drag towards 1.3710-20, which is the 61.8% Fibonacci retracement of Wave 1. GBP/USD bulls would remain inclined to resume higher thereafter.

Alternate count:

If GBP/USD bulls are successful to break consistently above the 1.3900 mark, the door opens for a test of 1.3950 resistance and further. Either way, GBP/USD bulls are now targeting the 1.4000-1.4100 mark in the next few weeks.