The GBPUSD has taken a beating for the past few months. However, the short term wave count along with extreme readings on the COT report suggest that relief is in sight.
The GBPUSD has taken a beating since early November; so is a bottom in site? Maybe…there is significant support near today’s low. Two 161.8% extensions (2.1160-2.0353/2.0831 and 2.0830-2.0180/2.0576) are at 1.9525 and 1.9523. Also, a line drawn off of the 11/16 and 12/24 lows intersects with today’s low. Not to mention, the spike below 1.9500 (which is a psychological support in and of itself) sets up a nice bear trap. At this point, there is no clear trade because there is no clear risk. Keep abreast of developments by checking the technicals daily or by visiting the Elliott Wave forum.
The Commitments of Traders reports often signal major turns within a window of a few weeks. The lines on the chart are (from top to bottom), a 52 week percentile of commercial longs expressed as a percentage of total positions, a 52 week percentile of speculative longs expressed as a percentage of total positions, the 52 week COT Index and the 13 week COT Index.
The % of total commercial positions that are long measured through a 52 week percentile is at 98 and the % of total speculative positions that are long measured through a 52 week percentile is at 0. The 52 and 13 week COT Indices are both at 0. Readings such as this are VERY rare. Indeed, the last reading that was this bullish for Cable was in November 2005 when the GBPUSD bottomed at 1.7047. For more on the COT, visit [COT](301 Moved Permanently http:/www.dailyfx.com/story/charting_center/futures_positioning_cot_report/GBPUSD_Nearing_a_Bottom_1199712407320.html).
What else suggests that the British Pound may find a bottom, at least temporarily? The EURGBP rally is stretched. The rally from .6671 is wave 3 within a 5 wave rally from .6535. Wave 3 has already traveled 261.8% the price distance of wave 1. Wave 4 will probably be sharp because wave 2 was shallow (or flat). .7250 is a potential support level for the EURGBP.