GBP/USD – 1.3491
Sterling did rallied again after brief pullback to 1.3153 (we recommended in our previous update to buy at 1.3165 and a long position was entered), the subsequently surged to as high as 1.3619 (our upside target at 1.3365 was met basically on the same day with 200 points), this anticipated move adds credence to our bullish view that the medium term erratic rise from 1.1986 low has resumed and upside bias remains for this move to extend further gain to 1.3650-55 (100% projection of 1.1986-1.3048 measuring from 1.2589) and 1.3700-10, however, overbought condition should limit upside to 1.3800 and price should falter well below 1.3955-60 (50% Fibonacci retracement of intermediate downtrend from 1.5930-1.1986).
Our preferred count on the daily chart is that cable’s rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has possibly ended at 1.7192, below support at 1.4232 would add credence to this count, then further fall to 1.4000 level would follow but reckon downside would be limited to 1.3655 support and price should stay above previous support at 1.3500.
On the downside, although current pullback from 1.3619 suggests initial downside risk is for minor correction to 1.3450-55, reckon downside would be limited to 1.3380-85 and bring another rise later to aforesaid upside targets. Below previous resistance at 1.3329 (now support) would defer and suggest a temporary top is possibly formed, bring retracement of recent rise to 1.3290-00, then 1.3240-50 but said support at 1.3153 should remain intact, bring another upmove later.
Recommendation: Long entered at 1.3165 met target at 1.3365 with 200 points profit and would buy again at 1.3390 for 1.3590 with stop below 1.3290.
Longer term – Cable’s rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver with wave (A) ended at 1.3500 (23 Jan 2009), wave (B) itself is labeled as A: 1.6733, triangle wave B: 1.4813 and wave C as well as top of wave (B) ended at 1.7192 (2014), hence the selloff from there is an impulsive wave (C) with wave I : 1.4566, wave II 1.5930, an extended wave III is unfolding and already exceeded our downside target at 1.3500 and 1.3000, hence weakness to 1.2500 and possibly 1.2000 cannot be ruled out, however, price should stay well above psychological level at 1.0000.
