GBP/USD – 1.3132
Despite rebounding to 1.3321 last week, as sterling retreated again after faltering below indicated previous resistance at 1.3338, retaining our bearishness, however, the subsequent bounce from 1.3039 suggests further choppy trading would take place and recovery to 1.3200 cannot be ruled out but upside should be limited to 1.3240 and bring another decline later. Below 1.3039 support would bring a retest of 1.3027, break there would confirm the fall from 1.3658 top has resumed for weakness to 1.3000, then towards 1.2950 but support at 1.2909 should limit downside and another previous support at 1.2852 would remain intact.
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 upside, although initial recovery to 1.3170 cannot be ruled out, reckon upside would be limited to 1.3220-25 and bring another decline. Above 1.3240-50 would risk a stronger rebound to 1.3300 but only break of indicated resistance at 1.3338 would shift risk to upside and signal another leg of rebound from 1.3027 is underway for further subsequent gain to 1.3400 and possibly towards resistance at 1.3455. Having said that, if our view that top has been formed at 1.3658 is correct, upside would be limited to 1.3500-10 and bring another decline later.
Recommendation: Stand aside for this week.
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.