Yesterday’s break below last week’s 1.2953-area support reaffirms the developing peak/reversal count introduced in 04-Aug’s Technical Blog and leaves Fri’s 1.3031 high in its wake as the latest smaller-degree corrective high this market needs to recover above to threaten the skid and perhaps resurrect this year’s broader bull. In lieu of such 1.3031+ strength at least the intermediate-term trend is down and is expected to continue and possibly accelerate. Per such 1.3031 is considered our new short-term risk parameter from which non-bullish decisions like long-covers and new bearish punts can be objectively based and managed.
While this year’s longer-term uptrend remains arguably intact until the market breaks 21-Jun’s 1.2589 larger-degree corrective low (or 23-Jun’s 1.2718 corrective low weekly close below) needed to CONFIRM a bearish divergence on a major scale, it’s easy to see the prospect that 03-Aug’s 1.3267 high COMPLETED a textbook 5-wave Elliott sequence from 16-Jan’s 1.1988 low as labeled in the daily chart above. Left unaltered by strength above at least Fri’s 1.3031 high, further and possibly steep losses should not surprise as the market may be early in the correction of a 7-month, 10% move that could easily span a few months and drive prices to the 1.2625-to-1.2475-range or lower.
Finally, on a monthly log scale basis below, we have discussed the 1.35-to-1.38-handle-area that provided mammoth support for seven years until Jun’16’s meltdown below it that renders it an equally mammoth new resistance candidate and key gateway the bull’s got to break through to break the secular bear market. While it may take quarters before we’ll know whether 2017’s rally from 1.1988 is the start of a new secular bull market in sterling or just another bear market correction, that 1.35-to-1.38-area has to be acknowledged as a key resistance area. Given the magnitude of this factor, momentum failures like this early-Aug one should not be taken lightly as it could morph into a more protracted correction lower OR resumption of the secular bear market.
These issues considered, shorter-term traders remain advised to maintain a cautious bearish policy with a recovery to 1.2900 OB considered a corrective selling opportunity and further strength above 1.3031 required to threaten this call enough to warrant its cover. Long-term players are advised to neutralize the balance of a cautious bullish policy at-the-market and also look to move to a bearish stance as 1.2900 OB with a recovery above 1.3031 required to stand aside. In lieu of such 1.3031+ strength further and possibly extensive losses should not surprise with former 1.2950-area support considered new near-term resistance.