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The market’s gross failure thus far to sustain this week’s earlier break to a new 34-YEAR low in the futures contract and recovery above both our short- and longer-term risk parameters at 1.2236 and 1.2320 ignites a confluence of factors that warn of a base/correction/reversal-threat environment that could prove major in scope. Obviously, we cannot conclude a major base/reversal following just a couple days’ rebound, but this relatively minor bullish divergence in momentum does identify Tue’s 1.1965 low clearly as one of developing importance and our new longer-term risk parameter from which non-bearish decisions like long-covers can be objectively based and managed.
On a smaller scale detailed in the 240-min chart below, today’s continuation of the past couple days’ reversal leaves today’s 1.2216 low in its wake as a very minor corrective low that can be used as a short-term risk parameter to non-bearish decisions by shorter-term traders with tighter risk profiles. This 1.2216 risk parameter may come in handy in confirming the END to what we believe is just an initial (A- or 1st-Wave) rally that, given the magnitude of the secular bear trend, is highly likely to be rebutted by a (B- or 2nd-Wave) corrective relapse. This correction could be extensive, retracing more than 61.8% of the initial counter-trend attempt. But such a correction could present an outstanding risk/reward opportunity from the bull side in the week or two ahead.
![](https://rjofutures.rjobrien.com/images/2019/09/british-pound-sep19-240-min-chart.gif)
![](https://rjofutures.rjobrien.com/images/2019/09/british-pound-daily-chart.gif)
The unique and compelling factors that warn of a major base/correction/reversal environment include:
- today’s bullish divergence in daily momentum shown in the daily chart above
- an arguably complete (textbook even) 5-wave Elliott sequence down from 13-Mar’s 1.3383 high
- a developing “outside WEEK up” (lower ow, higher high and higher close than last week’s range and close)
- the failure to sustain losses below Jan’17’s historic 1.2001 low and, most indicting,
- historically bearish sentiment/contrary opinion levels not seen in over TWO YEARS.
To be sure, the longer-term bear trend has been massive and it will require commensurately larger-degree strength above at least the 1.25-handle to expose a major reversal higher. The weekly log chart below shows key former support from Dec’18 around the 1.2500-area and 1.2502 is the 38.2% retrace of Mar-Sep’s 1.3383 – 1.1957 portion of the bear, so the general 1.2500-area should be approached as a key resistance candidate.
Further evidence in the form of labored, 3-wave corrective relapse attempts followed by a resumption of this week’s presumed initial counter-trend rally is minimally required to reinforce a broader base/reversal count. But until and unless Tue’s 1.1957 low and new key risk parameter is broken, the technical facts listed above identify a unique and compelling argument for moving to at least a neutral/sideline policy if not a cautiously bullish one.
![](https://rjofutures.rjobrien.com/images/2019/09/british-pound-weekly-chart.gif)
Finally, the monthly log chart below shows this week’s poke below Jan’17’s 1.2001 low to the lowest level in the futures contract since Apr 1985. But while commensurately larger-degree strength in the weeks and even months ahead obviously remains required before we can conclude a major reversal, the market has thus far identified the 1.20 level/area/condition as one of developing importance. A clear, impulsive break below 1.1950 is now required to mitigate any base/correction/reversal count, reinstate the secular bear and expose potentially extensive losses thereafter. Until and unless such weakness is resurrected, traders are advised to move to a neutral-to-cautiously-bullish policy and first approach setback attempts to the 1.2150-area or below as corrective buying opportunities after a bullish divergence in short-term mo stems such a relapse and specifies a low and support from which such bullish punts can be objectively based and managed.
![](https://rjofutures.rjobrien.com/images/2019/09/british-pound-monthly-chart.gif)