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British Pound Gets Pounded: Will the Real Reason for the Fall Please Stand Up

See how Elliott wave patterns warned the pound was slated to fall before UK Prime Minister Boris Johnson "set up a cliff edge"

by Nico Isaac
Updated: December 19, 2019

On Monday December 16, the British pound plummeted 1.5% against the U.S. dollar for its largest single-day drop in a year. This was NOT a case of "Who done it"? According to every mainstream outlet from High Street to Wall Street, one man was sterling's own Ebenezer Scrooge: UK Prime Minister Boris Johnson.

The alleged offense: On December 16, Johnson announced plans to add a law to the Withdrawal Agreement Bill (a.k.a. Brexit) making it illegal to extend the time period allotted for the post-Brexit transition between Britain and the EU.

Johnson's revision, dubbed "reckless," a "stark reality check," and "manifesto" by a newly emboldened politician was universally cited as the catalyst for the pound's losses, as these news items confirm:

  • "GBP Sterling Plunges Against Euro and Dollar After Boris Johnson Gamble" (Express.co.uk)
  • "Boris Johnson Sends Pound Tumbling with Brexit Statement" (The Independent)
  • "Pound Slumps 1% As Boris Johnson Raises Fresh Risk of a No-Deal Brexit" (CNBC)

So -- blame Boris. Case closed. The timeline is clear: Johnson speaks, market falls. So would you believe me if I told you that the fall was set up three days earlier, and you could have seen it coming?

On December 13, our Currency Pro Service editor Jim Martens identified a completed five-wave rally on the British Pound/US Dollar's price chart. For newbies, here's an idealized diagram of the basic Elliott wave rally-correction sequence, 5 waves up and 3 waves down:

5waves3wavespattern

Now, here's Jim Martens' chart from the December 13 Currency Pro Service, which shows the five-wave move and his bearish forecast:

"The rally underway from 1.1959 is in its terminal stages.

"The completion of a five-wave rally will set the stage for the largest correction in over three months..."

121319CPSpound

On December 15, Currency Pro Service updated subscribers again via this chart:

121519CPSpound

And the pound's multi-day downturn followed, as Elliott waves predicted:

121819CPSpound

The reason why Elliott waves work is because they help you track investor psychology. You can see which way it's likely headed well before the news. Often, the news only serves as a convenient "explanation" for a market move that was in the cards... err, waves, long before.

The political horizon is certain to contain many more drastic shocks no one saw coming. But for Elliott wave traders, the horizon is filled with high-confidence setups, news or no news.

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