Posted on Jun 14, 2023, 09:24 by Dave Toth
On the heels of yesterday’s negation of Mon’s bearish divergence in very short-term momentum by recovering above Mon’s 1.2601 high, the 240-min chart below shows this morning’s break above 10-May’s key 1.2692 high that nullifies 24-May’s bearish divergence in daily momentum, chalks up May’s setback as a 3-wave correction and reinstates what we believe is the start of a new secular bull trend in sterling from last Sep’s 1.0392 low. This resumed strength leaves smaller- and larger-degree corrective lows in its wake at 1.2489 and 1.2314, respectively, that this market is now required to sustain gains above to maintain a more immediate and possibly explosive bullish count. Its failure to do so will threaten and then negate this bullish count and resurrect a count calling for a larger-degree corrective rebuttal to the 9-month rally. Per such, 1.2489 and 1.2314 serve as our new short- and long-term parameters from which traders can objectively base and manage non-bearish decisions like short-covers and resumed bullish exposure.
On a broader scale, the daily (above) and weekly (below) log scale charts show today’s resumption of the major uptrend from 26Sep22’s 1.0392 low that we believe ended a multi-year secular bear trend and started a new secular move higher that could span years. The trend is up on all practical scales and should not surprise by its continuance or acceleration straight away. Per such a resumed and potentially major bullish count, this market should not come anywhere near recent corrective lows at 1.2489 and especially 1.2314, let alone break below these levels. Doing so would suggest the resumed rally from 08-Mar’s 1.1803 low is the completing 5th-Wave of the rally from last Sep’s 1.0392 low and expose a corrective rebuttal that could be extensive in terms of both price and time. Until and unless such weakness is shown however, further and possibly accelerated gains straight away should not surprise, with the former 1.26-handle-area resistance expected to hold as new near-term support.
These issues considered, all previously recommended bearish policy and exposure have been nullified and traders are further advised to move to a cautious bullish stance from current 1.2690-area levels OB, with a failure below 1.2489 required to negate this specific call and warrant its cover. In lieu of such weakness, further and possibly steep gains straight away are expected.
