Cable, Sharp Move Coming ? by D Solin

Cable is consolidating since the Jan 22nd low at 1.9340. Though seen as a correction with eventual new lows after its completion, there is scope for another few weeks (or more) of wide ranging back to the March 14th high at 2.0395 and even temporarily above first. Also, the market may be forming a wedge-like pattern since the 2.0395 high, raising potential for a sharp upside resolution of the ceiling (currently at 1.9900) ahead.

Cable is consolidating since the Jan 22nd low at 1.9340. Though seen as a correction with eventual new lows after its completion, there is scope for another few weeks (or more) of wide ranging back to the March 14th high at 2.0395 and even temporarily above first. Also, the market may be forming a wedge-like pattern since the 2.0395 high, raising potential for a sharp upside resolution of the ceiling (currently at 1.9900) ahead. Note too that these patterns break down into 5 legs and with the recent weakness seen as that final downleg (wave 5, see numbering on daily chart below), suggests that an upside resolution may indeed be near (see “ideal” scenario in red on daily chart). Don’t forget too that eur/gbp continues to form a large rising wedge over the last month, which is expected to eventually resolve sharply lower, and in turn be expected to give cable a boost. For now in cable would by here (currently at 1.9630), initially using a wide stop on a close below the bullish trendline since Jan (currently at 1.9400). Support before there is seen as the base of the possible wedge (currently at 1.9610/25), while resistance before the ceiling (currently at 1.9900) is seen at 1.9745/55. Note only an extended period of chopping/ranging since the late March buy at 1.9975, before flattening on a close below the 1.9735 support area that had held since early March.

Longer term, still view the trade since the Jan low at 1.9340 as a large correction with eventual new lows below after. However as mentioned above, there is still scope for another nearer term upleg back to the 2.0395 and even temporarily above before resuming the longer term decline (see “ideal” scenario in red on weekly chart below). So for now, would continue to trade the shorter term view (see above) but with the expectation of a bigger picture chance to reshort ahead (and likely at higher levels). Longer term resistance above 2.0395 is seen at 2.0465 (62% retracement from the Nov high at 2.1160), while support below 1.9340 is at the long held 6 year bullish trendline (currently at 1.8825).

David Solin
Partner, Foreign Exchange Analytics

 

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Foreign Exchange Analytics has it's roots in both the emerging information technologies and the global economy that characterized the last two decades.  As currency transaction volumes soared in the wake of the 1985 Plaza accord, the need for timely concise information on what forces were driving and would drive exchange rates became critical.   David Gilmore was one of a new breed of analyst that saw a void of relevant, market moving... More