GBP/USD – 1.3408
Although cable retreated initially this week, renewed buying interest emerged at 1.3221 and the pair has surged again, adding credence to our bullish view that the erratic rise from 1.3027 is still in progress, hence upside bias remains for this move to extend further gain to resistance at 1.3455. Having said that, a sustained breach above this level is needed to suggest the correction from 1.3658 has ended at 1.3027 and bring subsequent rise to 1.3500-10 and then 1.3550-60.
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, whilst pullback to 1.3350-60 cannot be ruled out, reckon 1.3330-35 would limit downside and bring another rise later. Only below said support at 1.3221 would abort and signal top is formed instead, risk weakness to 1.3190-00, then towards 1.3140-50 but reckon downside would be limited to 1.3090-00 and support at 1.3062 should remain intact, bring another rebound later.
Recommendation: Buy at 1.3340 for 1.3540 with stop below 1.3240.
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.
