Bear Returns to Cable Crosses


GBPJPY – There is no change to our outlook for the GBPJPY. The rally from 221.10 has taken on the form of a diagonal triangle (wedge). Looking at the longer term chart, we still favor another leg down to complete at least a 3 wave correction from 241.54 (A-B-C). That said, GBPJPY could extend to the 78.6% of 241.52-221.10 at 237.12 before the next leg down begins. In fact, it seems likely that the pair rallies above 235.15 in order to complete the rally leg that began at 3/28 at 228.77. Coming under the short term trendline drawn off of 222.626 and 228.77 would signal that the next leg down is underway.

GBPCHF – The GBPCHF is also tracing out a corrective pattern following the January – early March sell-off. The rally off of 2.3291 is in 3 waves and may be complete. A rally above 2.4144 shifts focus to the 61.8% of 2.4311-2.3291 at 2.4200, but the C wave decline that will take price under 2.3291 may already be in progress. Price is currently testing a short term trendline. A decline below 2.3754 would be a strong indication that wave C down was in progress.

GBPAUD – We remain bearish following the break of the longer term trendline support two weeks ago. Weakness is likely to extend in a 3rd wave to the 161.8% extension of wave 1 (2.5492-2.4664) at 2.3681. This happens to intersect with the 4/26/06 low at 2.3671. We’ll look for a corrective 4th wave to follow.