GBP/USD – 1.3173
Although cable met resistance at 1.3230 and retreated, as sterling found support at 1.3062 earlier this week and has rebounded, suggesting further consolidation above recent support at 1.3027 would take place and mild upside bias remains for another bounce to said resistance, break there would extend gain to 1.3290-00 but reckon resistance at 1.3338 would cap upside, bring further choppy trading. Only a break of 1.3338 would retain bullishness and signal the fall from 1.3658 top has ended at 1.3027 and bring a stronger subsequent bounce 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.
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, expect pullback to be limited to 1.3090-00 and support at 1.3062 should hold, bring another rebound later. Only a drop below indicated strong support area at 1.3027-39 would revive bearishness and 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.
Recommendation: Buy at 1.3090 for 1.3290 with stop below 1.2990.
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.