British Pound Fail at Resistance: Attempt to Form Bases

There are 5 waves down from the October high at 2.4205. This may comprise wave 3 of what turns out to be a 5 wave drop from 2.4963. Under this count, a 4th wave is underway now and could test the 38.2% of 2.4205-1.9421 at 2.1249. This intersects with the former 4th wave as well. A more shallow correction would test the 23.6% at 2.0550.

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 in a bull cycle and the drop from 2.0906 to 1.9307 as the second 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 months. This bullish outlook remains intact as long as price is above 1.9794. Also, the drop from the December 2006 high (2.3575 is in 5 waves), therefore at least a 3 wave advance is expected.

The GBPAUD downtrend remains strong. A break of the 2/28 low at 2.0948 is imminent. As long as price is below the resistance line drawn off of the 8/17/07, 12/17/07, and 3/20/08 highs, expect lower prices. Potential support is at a line that is extended from the 10/29/07 and 2/28/08 lows; at 2.0435 today (decreases about 9 pips per day).

The GBPNZD broke through a 6 month resistance line early last month and has held above that line for 1 month now. This kind of action suggests that a large base is forming and that the GBPNZD is headed higher in the coming weeks and months. The outlook is bullish as long as price is above 2.4112 (horizontal line).

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