Posted on May 04, 2023, 08:03 by Dave Toth
Yesterday’s eking out of another new high, this time above last Fri’s 1.2599 high, reaffirms and reinstates the major reversal from last Sep’s 1.0392 low. It’s still indeterminable whether the resumed rally from 10-Apr’s 1.2364 low is the completing 5th-Wave of an initial rally from that 1.0392 low ahead of an extensive corrective relapse OR a component of the dramatic 3rd-Wave of the major reversal that could blow the lid off this market. What we know for a technical fact however is that the trend is up on al scales and that this latest spate of strength, as labored as it is, leaves smaller- and larger-degree corrective lows in its wake at 1.2448 and 1.2364 that the market is required to fail below to threaten a broader bullish count to the point of non-bullish action like long-covers. Until and unless such weakness is shown, a bullish policy and exposure remain advised.
Former mid-1.25-handle-area resistance would be expected to hold as new near-term support per the broader bullish count.
The daily (above) and weekly (below) log scale charts show yesterday’s continuation of the reversal from last Sep’s 1.0392 low. We’ve discussed often since 4Q22 that the extent and impulsiveness of this recovery, combined with what was understandably historically bearish sentiment levels, warn of a base/reversal environment that could be mammoth in scope, like a new secular bull market in sterling. The daily chart, however, also shows upside momentum over the past month that looks to be dying on the proverbial vine. To CONFIRM this divergence to the point of non-bullish action however requires a failure below 10-Apr’s 1.2364 larger-degree corrective low. That would break AT LEAST the uptrend from 08-Mar’s 1.1803 low and could complete a 5-wave sequence that dates from last Sep’s low that would expose a major correction lower. Until and unless this market fails below at least 1.2448 and especially 1.2364, the trend remains up on all scales and should not surprise by its continuance or acceleration straight away.
These issues considered, a bullish policy and exposure remain advised with a failure below 1.2448 required for shorter-term traders to move to the sidelines and subsequent weakness below 1.23664 for longer-term institutional players to follow suit. In lieu of such weakness, further and possibly accelerated gains remain expected.