GBP/JPY - Weekly

[SeM0s]

Summary

• Long term outlook: Down
• Medium Term Outlook: Up
• Short Term Outlook: Sideways to Up
• Outlook Revision Point: Break above 216.00
• Potential Long Term Targets: 118 and below

The main chart shows our preferred count for the current position of the pair with a weekly closing price at 146.09. As per our preferred view, we expect the week to be mixed with a small downward move at the start of the week to between 142.60 and 140.00, followed by a rally to above the high of December 7 at 149.30.

As an alternative view of the current situation, we are considering the possibility of wave B.2 unfolding as a barrier triangle. As shown in the second image, if this scenario is to prove correct, we have already completed wave ‘a’ and wave ‘b’ of the potential a, b, c, d and e of this barrier triangle, completing which, we should witness another sell off making a low near the 130.00 level.

We hope to see a clarification of the situation and the ruling out of one of the two possibilities through the market action in the upcoming days. Till such time, very short term trading positions will be considered.

[SeM0s]

Summary
Long term outlook: Down
Medium Term Outlook: Down
Short Term Outlook: Sideways to Down
Outlook Revision Point: Break above 216.00
Potential Long Term Targets: 118 and below

The prices have advanced in more of a corrective fashion, since our last report. In view of this apparently corrective unfolding of the parity, the alternative outlook presented in our last report has been promoted to the preferred outlook.

As per the main image, it seems that we are still in the process of making wave ‘2’ or ‘B’ to the downside. The October 7, 2009 low at 139.72 is seen as wave A of the three wave correction and since then we are most likely seeing wave B unfolding in the shape of a triangle. If this is correct, we would expect the parity to fall down to the 141.70 mark in the upcoming days to complete d.B, before the last leg (wave ‘e’) of the potential triangle is completed on the upside. The completion of the triangle should be followed by another downward leg to complete the correction.

As an alternative bullish count, the downward correction may have been completed at the November 27, 2009 low at 139.31, followed by wave ‘1’ or ‘a’ up at the December 7, 2009 high (149.30), which, in turn, is followed by an expanded flat form of a correction, of which wave ‘a’ and wave ‘b’ have been completed and we are now in the process of completing the wave ‘c’ in five wave. The completion of wave ‘c’ will be followed by an upward move, which should potentially break the highs of August 7, 2009 at 163.08.

In either case, the first move in the upcoming days is assessed to be downwards. Thus, during the coming week, we shall be looking for high probability, low risk sell signals to materialize to take short positions targeting around the 142.00 area.

[SeM0s]

Summary

• Long term outlook: Down
• Medium Term Outlook: Down
• Short Term Outlook: Sideways to Down
• Outlook Revision Point: Break above 216.00
• Potential Long Term Targets: 118 and below

The main image of the GBP/JPY daily chart presents our preferred scenario. With the August 7, ’09 high (163.08) in the position of 1 or A, followed by an A wave at the October 7, ’09 low (139.72). Since then, we seem to be making a B wave triangle, of which possible waves a, b and c have been marked and a potential wave d and e are still to form. If this assessment is correct, we would expect the parity to fall down close to the 141.70 mark in the upcoming days to complete d.B, before the last leg (wave ‘e’) of the potential triangle is completed on the upside. The completion of the triangle should be followed by another downward leg to complete the correction.

As an alternative bullish count, the downward correction may have been completed at the November 27, 2009 low at 139.31, followed by wave ‘1’ or ‘a’ up at the December 7, 2009 high (149.30), which, in turn, is followed by an expanded flat form of a correction, of which wave ‘a’ and wave ‘b’ have been completed and we are now in the process of completing the wave ‘c’ in five wave. The completion of wave ‘c’ will be followed by an upward move, which should potentially break the highs of August 7, 2009 at 163.08.

[SeM0s]

Summary
Long term outlook: Down
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Outlook Revision Point: Break above 216.00
Potential Long Term Targets: 118 and below

The last week saw the parity fall down to below the 140 mark completing our first target for the downward move. Also, having gone below the November 27, ’09 low (139.31), the possibility of the formation of an Expanded Flat, as given in our alternative case scenario presented in the last week’s report, was also ruled out. Our preferred scenario presented during the reports of the last few weeks, however, still holds valid. As per that preferred scenario, we are at or near the completion of wave d of a possible triangle in wave B (main image). Nevertheless, for this B-wave triangle scenario to hold validity, we should see a three wave rally for a wave e to start without breaking below the 136.75 mark. This provides us with a potential short term longing opportunity in the market with a calculated target at the emergence of Low Risk, High Probability intraday buy signals. However, for the upcoming days the real trade to watch out for in this scenario will be to take a short at the possible end of the e wave, from where a downward move lasting several days is likely to be witnessed.

If, however, the parity falls below the cut off point at 139.31, then our current alternative scenario will come into play (second image). As per this alternative scenario, we have had a completed wave B (in blue) at the October 23, ’09 high at 153.24, followed by a possible wave i at the November 27, ’09 low (139.31), a completed wave ii at the January 4, ’10 high (150.72), with a wave iii now in progress. If this scenario is to hold true, we would expect a further fall down in the upcoming days, without much rise. Our target for the completion of wave 2 or B in this case would be close to the 128.50 area.

[SeM0s]

Summary

Long term outlook: Down
Medium Term Outlook: Down
Short Term Outlook: Sideways to Up
Outlook Revision Point: Break above 216.00
Potential Long Term Targets: 118 and below

No significant change in the situation from what it appeared at the time of writing the last week’s report. We are reproducing the last week’s report with updated images.

The last week saw the parity fall down to below the 140 mark completing our first target for the downward move. Also, having gone below the November 27, ’09 low (139.31), the possibility of the formation of an Expanded Flat, as given in our alternative case scenario presented in the last week’s report, was also ruled out. Our preferred scenario presented during the reports of the last few weeks, however, still holds valid. As per that preferred scenario, we are at or near the completion of wave d of a possible triangle in wave B (main image). Nevertheless, for this B-wave triangle scenario to hold validity, we should see a three wave rally for a wave e to start without breaking below the 136.75 mark. This provides us with a potential short term longing opportunity in the market with a calculated target at the emergence of Low Risk, High Probability intraday buy signals. However, for the upcoming days the real trade to watch out for in this scenario will be to take a short at the possible end of the e wave, from where a downward move lasting several days is likely to be witnessed.

If, however, the parity falls below the cut off point at 136.75, then our current alternative scenario will come into play (second image). As per this alternative scenario, we have had a completed wave B (in blue) at the October 23, ’09 high at 153.24, followed by a possible wave I at the November 27, ’09 low (139.31), a completed wave II at the January 4, ’10 high (150.72), with a wave III now in progress. If this scenario is to hold true, we would expect a further fall down in the upcoming days, without much rise. Our target for the completion of wave 2 or B in this case would be close to the 128.50 area.