British Pound Crosses Diverge


There are 5 waves down from the October high at 2.4205. This probably comprises wave 3 of a 5 wave decline from 2.4963. The pair has broken below a short term support line that had contained price since mid-April, which is evidence that wave 4 ([B]iv) [/B]is complete. Also, the decline on intraday charts looks impulsive. We remain bearish against 2.0963.


There is no change to the idea that “a major bullish base has formed”. We view rally from 1.9011 to 2.0906 as the first wave (probably an A wave) in a bull cycle and the drop from 2.0906 to 1.9307 as the second wave (probably a B wave) in that bull cycle. Whether the cycle proves to be 3 or 5 waves does not matter at this point. Both scenarios call for a rally through 2.0906 in the coming weeks and months. This bullish outlook remains intact as long as price is above 1.9307. Also, the drop from the December 2006 high (2.3575 is in 5 waves), which supports the argument for at least a 3 wave advance to unfold.


The GBPAUD downtrend may be nearing an end. We have focusing on the resistance line drawn off of the 8/17/07, 12/17/07, and 3/20/08 highs. As long as price is below there, the bear bias remains. Potential support is at a line that is extended from the 10/29/07 and 2/28/08 lows; at 2.0184 today (decreases about 9 pips per day). There is also a measured objective at 2.0406 (100% extension of 2.5638-2.2184 / 2.3887). In summary, the 2.02/04 area should provide strong support that may even lead to a sizeable reversal.


Let’s take a simple look at the GBPNZD daily chart. Quite often, it is the simplest charts that tell us the most. The February low made a double bottom with the December 2006 low just above 2.41. Since then, there has been a small bull leg followed by a 2 month consolidation (since March 10). The pair is pressing against the top of that congestion zone right now; which presents the opportunity to get long for a bullish break.

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[B]TREND ANALYSIS[/B] is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.

[B]SCHEDULE[/B]
Monday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD
Tuesday: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY
Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD
Thursday: AUDCHF, AUDCAD, AUDNZD