British Pound Crosses: Bullish Potential from Current Levels

[DailyFx]

The British pound crosses, particularly the GBPNZD, are likely to work higher from near current levels. Risk on the GBPNZD is about 600 pips but the bullish target is not until over 3,000 pips.









I mentioned the possibility of a triangle last week. This appears to be what is going on now. This does not change the bearish bias in the long run, it just delays it. Expect range trading over the next several weeks in waves c, d, and e of the triangle. Ultimately, we expect a test of long term measured support; at 1.9125.




Looking out longer term, the GBPCAD has held within the boundaries of a downward sloping channel. The decline from the 2006 high at 2.3579 is in 5 waves and wave 4 was a triangle. Expect a return to at least the 38.2% of the drop from 2.3579, which is at 2.0407.




A long term downward sloping channel has contained price since September 2001. The rally from the bottom of the channel reached 2.3167, between the 50% and 61.8% of 2.5661-2.0291. I wrote last week to “expect weakness near term before strength resumes.” After dropping to 2.1802, the pair has turned up. Expectations are for strength and an eventual test of the upper channel line (probably in a number of weeks though). If the pair slips below 2.1802, then potential support from Fibonacci is at 2.1345.




A C wave is working higher from the low earlier this year. This advance will most likely exceed 3.0702 within the next year. 2.5726 may be a wave ii of 2 low. A bullish bias is warranted against there although price ideally remains above 2.6420.



Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT Analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.



Contact at jsaettele@dailyfx.com