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. Under this count, a 4th wave is working towards Fibo resistance / congestion area at 2.1249/2.1813. Expectations are the GBPCHF to work higher and reverse in this area before heading to a new low (below 1.9421).
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 weeks and 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), which supports the argument for at least a 3 wave advance to unfold. Ideally, price remains above 1.9709.
The GBPAUD downtrend remains strong. We wrote last week that “a break of the 2/28 low at 2.0948 is imminent.” The pair did break that level and is just below 2.0864 currently. 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 2.0288 today (decreases about 9 pips per day).
A drop below 2.4112 would complete 5 waves down from the September high at 2.9718. Price is testing the Elliott channel resistance, so this is a good place for the pair to reverse and end wave 4. The bearish bias is intact as long as price is below 1.6127.
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[B] [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
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