Commentary - We wrote last week that “we are treating the entire decline from the top (251.10) as large wave A. The advance from 219.30 is large wave B. The rally from 219.30 may be just the first leg of wave B though. 235.61 is near term resistance for wave a of B. A b of B decline (might be underway now) will give way to a thrust higher in wave C, possibly towards the 61.8% of 251.10-219.30 at 238.95 before the next down leg begins. If 234.89 is the top of wave a of B, then a solid support zone is 225.26-229.94 (38.2%-61.8% of 219.30-234.89) and wave c of B should begin somewhere in that zone.” There is little to change from last week as the path that we laid out has proved correct so far. Wave a of B ended at 235.50 and a b of b decline ended at 227.40 (in the cited zone). It is possible that a triangle unfolds in wave b (between 235.50 and 227.40) but that would just delay a thrust higher in wave c of B. The best opportunity in the GBPJPY will be to sell the top of wave B. That top could come at the mentioned 61.8% at 238.95 or the 78.6% at 244.29. 243.59 would also be where wave c of B would equal wave a of B.
Strategy - Flat
Commentary - There is little to add regarding the GBPCHF as the pair continues to correct higher from the 8/17 low of 2.3758. We maintain that this countertrend move will end near the 50%-61.8% retracement of 2.4963-2.3758 at 2.4361-2.4503. Both of these levels are previous reaction highs as well. Look for a top and reversal there to be followed by a re-test of the support line drawn off of the July 2006 and March 2007 lows.
Strategy - Remain bearish against 2.4963, target below 2.3288.
Commentary - There is little to add regarding the GBPAUD. The decline from the 8/17 high of 2.5638 is clearly corrective therefore we expect a new high (above 2.5638). However, a rally through there should not be chased since a new high would potentially complete 5 waves higher from 2.3106 and risk of a pullback would be high at that point.
Strategy - Flat