Although sterling's retreat from 195.85 (2015 high) turned out to be much deeper than expected, as the British pound found support at 120.50 and staged a rebound in Q4 2016, retaining our view that further consolidation above 116.85 (tentatively circle wave V trough) would be seen and mild upside bias is seen for recovery to 150.00 and then 160.00, however, reckon upside would be limited to 175.00 and price should falter below 180.40-50, bring further choppy trading within 116.85-195.85 range. In the event sterling is able to penetrate resistance at 195.85, this would add credence to our view that low has been formed at 116.85 and revive our bullishness for major correction to take place, bring subsequent gain to 199.80-85 (61.8% Fibonacci retracement of 251.10-116.85). We are keeping our count that the circle wave V has ended at 116.85, hence major correction of early downtrend is unfolding for further gain to 199.80-200.00 (61.8% Fibonacci retracement of 251.10-116.85 and psychological resistance), next upside target is pointing at chart resistance at 215.85.
On the downside, whilst initial pullback to 140.00 and 138.00 cannot be ruled out, reckon 135.00 would contain downside and bring another rebound. Below 129.00 would abort and signal the rebound from 120.50 has ended instead, risk weakness to 126.50, then 124.80-85. Only a drop below said support at 120.50 would shift risk back to downside and signal the rebound from 116.85 has ended, bring further fall to 118.00, then retest of 116.85.