GBP/USD – 1.3350
Although cable rebounded last week to as high as 1.3521, renewed selling interest emerged there and the British pound has slipped again, retaining our view that further consolidation below 1.3550 would be seen and mild downside bias remains for weakness to 1.3300, then 1.3470, however, a break of indicated support at 1.3221 is needed to signal top has been formed at 1.3550, bring further fall towards 1.3250-60 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 upside, whilst initial recovery to 1.3400-10 cannot be rude out, reckon 1.3430-40 would limit upside and bring another decline later. Above said resistance at 1.3521 would abort and bring retest of 1.3550, break there would signal the rise from 1.3027 is still in progress for gain to 1.3595-00 but break there is needed to confirm early upmove has resumed for retest of 1.3658 resistance first.
Recommendation: Hold short entered at 1.3470 for 1.3270 with stop lowered to break-even.
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.