Elliott Wave Analysis of the GBP/USD Currency Pair by Sid from ElliottWavePredictions.com. Click on the chart twice to enlarge.

With the expectation for additional QE from the Fed reaching a fever pitch, I thought I would show this count one last time, with a reasonable understanding that it is very near invalidation. Everybody and their dog is aware now of the huge, 3-year-long triangle (shown below) that appears plain-as-day in the GBP as well as the Euro. I’ve also been counting the impulse down from April 30 to June 1 as a 5-wave impulse, with the expectation that it was wave 1 (black) of an eventual 5-wave thrust down out of the triangle. Subsequent price action counts best as corrective, most likely with a triangle in the middle of it (6-20 thru 8-16), with the price action since August 16 being an upward thrust from the wave X (blue) triangle. Using Elliott’s triangle measuring technique, the thrust target is at 1.62062.

Everything makes perfect sense with the wave count and internal structures except one thing: Wave 2’s within a thrust from a triangle really shouldn’t be retracing this deeply. This is a major concern to me, and is the main reason I have taken off all trades, and am waiting for confirmation or invalidation of this count before jumping back in. If the 3-year-long triangle scenario is correct, wave 3 (black) will be aggressive and quite long, so there will be plenty of time to size it up before committing to it.

If this wave count is invalidated, the entire see-saw structure from early 2009 is likely a much less predictable WXY(XZ) structure. The long-term main and alternate wave counts are shown on the weekly chart below.

In summary, I still think the movement up from the June 1 2012 low counts best as corrective, and that is why the main count shown on the 480 minute chart will remain my main count until invalidated. The consensus is that it will be invalidated because the dollar is screwed and Gold is off to the moon. That sentiment is becoming so prevalent, maybe, just maybe the main wave count still has a chance.

As a side note, I find it interesting that the Euro has been rallying since June 1, because year-over-year, while the US has not been printing, the ECB has increased the supply of Euros by over 47%!! I therefore still contend that there is not a strong fundamental case for a weaker dollar at this time. Why would the Fed print more dollars now? Inflation adjusted GDP, admittedly based on how the government “reports” it, is still above 3%, which is well above the current Fed rate of 0.25%. As long as inflation-adjusted-GDP remains above the fed rate, additional QE, as Bernanke has been telling us for a full year, would be “wreckless”. He apparently figured out about a year ago that the increased liquidity that QE had provided, while offsetting the deflation that naturally occurs following a credit bubble burst, was having no positive effect on employment. Expecting him to admit to that while in office would be folly though, so continued jawboning from the Fed, with very little substantive, sustained underlying action, seems the most likely course moving forward, in my opinion.