Last week, we focused on long EURJPY, AUDJPY, and CADJPY. Those are working nicely and risk and targets will be updated in the STRATEGY table. This week we are focusing on GBPJPY and GBPCHF.
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Sentiment measures, including COT data favors GBPJPY strength. Both legs of the cross (GBPUSD and USDJPY) show bullish patterns as well. Cable is expected to reach the 2.01/04 zone in the next month while the USDJPY is expected to test at least 108.50. This fits with the idea that a larger GBPJPY advance is underway from 204.61. Potential resistance begins at 217.47 (former congestion and 50% of 230.33-204.61).
We wrote yesterday that “the rally has accelerated today in what is the beginning of a run towards the mentioned 217 area. Risk is well defined at 207.81. Potential resistance before 217 is 212.10 and 214.02. We view the rally from 205.87 is the beginning of the final leg of a 4th wave – the first measured objective is 215.28.” The move higher today means that we can move risk to 209.35 and support should be strong in the 210.81/211.50 zone.
STRATEGY: Bullish (look to add in 210.81/211.50 zonr), against 209.35, target near 215/217.50
The longer term wave count for the GBPCHF is not extremely clear but what is clear is that the decline has stopped at long term support and that the GBPCHF has spent the better part of 2008 forming a base – presumably from which to work higher.
We mentioned that a triangle could be unfolding yesterday but that a more bullish outcome is also possible “as price is above 2.1427.” The more bullish outcome is now favored given the nearly 200 pip rally from open to close today. A break through 2.1782 would set sights on 2.2137. Risk can be moved to just under 2.1557.
Strategy: Bullish, against 2.1557, target TBD
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