Corrections in British Pound Crosses Present Opportunities
As Technical Strategist Jamie Saettele said last week, “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.
GBPAUD appears to be consolidating within a falling wedge, which signals the potential for a bullish reversal. If the pair can break above trendline resistance near 2.2075/2.21, price could rally to a strong resistance level near 2.2724/56 where we have the confluence of the 38.2% of 2.5638 - 2.0948 and 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. In the near-term, GBPNZD may be setting up to break higher for a test of 2.5146/97.
Written by Terri Belkas, Currency Analyst for DailyFX.com
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