Yesterday's break below 11-Oct's 1.2090 orthodox low confirms our longer-term bearish count re-introduced in 15-Dec's Technical Webcast. After spending only about an hour below that key low and former support at 1.2090 however, the market confirmed a bullish divergence in short-term momentum above yesterday's 1.2199 minor corrective high and area of former support-turned-resistance. This very short-term momentum failure defines yesterday's 1.2038 low as one of developing importance and a tight but objective micro risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.
Needless to say this bullish divergence in short-term mo is of a scale grossly insufficient to conclude anything more than another interim corrective rebound within the secular bear market. This divergence only allows one to conclude the end of the decline from 05-Jan's 1.2433 corrective high. As the daily chart below shows, the market needs to recoup that 1.2433 high to confirm a bullish divergence in DAILY momentum and the end of the decline from 06-Dec's 1.2776 larger-degree corrective high. In turn 06-Dec's 1.2776 larger-degree corrective high remains intact as our LONG-TERM risk parameter this market remains MINIMALLY required to recoup to even threaten the secular bear trend, let alone reverse it.
While technical and trading SCALE precludes us from concluding anything more than an interim corrective hiccup, market sentiment accorded the pound remains, understandably, at historically low, bearish levels. Such levels are typical of major BASE/reversal environments, but sentiment is not an APPLICABLE technical tool in the absence of a confirmed bullish divergence in momentum of a SCALE SUFFICIENT to threaten the long-term downtrend. Yesterday's recovery above 1.2200 is certainly insufficient to conclude a bottom and even further gains above 1.2433 won't do it. Only strength above 1.2776 will suffice in this regard.
But while the market has yet to provide such proof of strength needed to conclude a larger-degree bottom, it has recovered "enough" to define yesterday's 1.2038 low as one of developing importance and a MICRO risk parameter from which non-bearish decisions can be objectively based and managed. Bulls taking a low-risk punt "down here" cannot have any expectations of a major reversal higher. This is unrealistic and mixes risk and reward SCALES. Like that raffle ticket trade however, there is a smidge of objectivity and a ton of hope that such a major base/reversal environment is in its infancy.
In sum, short- and longer-term traders remain advised to maintain bearish policies and exposure with strength above 1.2433 and/or 1.2776 required to threaten or negate this call and warrant defensive measures. Scalpers and long-term dreamers are OK to consider raffle-ticket longs from 122.00 OB with a failure below 1.2038 negating this call and bashing the major reversal dream.