Sterling Setting Up a Wave 3 Fall?

The previous 2 down waves for Sterling appear to be impulsive. This sets up a bearish scenario that we’ll look to position for.

The main EW count shown on the chart above suggests we are grinding higher in a wave (ii). This should be a partial retracement that likely terminates below 1.5650. The sweet spot of a reversal is in the 1.5500 area.

If prices are successful in pushing below Sept 4, 2015 low of 1.5160, then the probability elevates that we are in a wave 3 and prices may move towards 1.37.

Elliott Wave Count – wave (ii) of circle ‘iii’ of (3) – this is at a very bearish portion of the wave sequence. The alternative view is that the June 18 high to the Sept 4 low is a larger corrective wave. This would retest highs of 1.6000 so the behavior near 1.55-1.56 sets the tone.

Wave Measurements - the Aug 25 to Sept 4 downtrend carves as a clean 5 waves (not shown). Look for a 50-61% retracement in wave (ii).

SSI – Currently sitting at +2.17 as the majority of traders are currently long.

OBV – The Daily chart OBV is hard on its lows as downside volume has been beating the upside volume.