Corrections in British Pound Crosses Present Opportunities

The British Pound crosses are mixed. Expectations are for a larger GBPCHF correction. A dip in the GBPCAD will present a bullish opportunity against 1.9307. The GBPNZD looks like it will range for the next month or so.

The GBPCHF is at its lowest level since September 1996. The portion of the decline since early October has been more or less in a straight line. This is characteristic of a 3rd wave. As far as form is concerned, it looks like there are 5 waves down from the October high at 2.4205. As mentioned, this would comprise wave 3 of what may turn out to be a 5 wave drop from 2.4963. Under this count, a 4th wave would begin soon (possibly 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. If wave 4 is underway from 1.9421, then it likely takes the form of a flat or triangle.

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. Near term, a drop below 1.9794 that tests Fibonacci support at 1.9725 or 1.9627 presents a buying opportunity against 1.9307.

The count in the GBPAUD is not clear at this point. One scenario that we see possibly playing out is price rallying to a strong resistance level near 2.2765 before reversing lower. This is the 61.8% of 2.3890-2.0949 as well as former daily high (2.2804).

Based on the short term structure in the GBPNZD, we expect a range to persist. Since the 2/25 low at 2.4112, the pair has rallied in 3 waves and declined in a choppy overlapping manner. This is indicative of a triangle. In fact, the up, down sequence since the 2/25 low may be waves A and B of triangle (triangles have 5 waves - A-B-C-D-E). If this forecast correct, then a range will continue for about another month.

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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.