Following 02-Jan’s break above both the late-Nov and late-Dec highs and resistance around the mid-1.35-handle as discussed in 03-Jan’s Technical Webcast, the 240-min chart below shows that the market has been merely wafting laterally. On the heels of the rally from 15-Dec’s 1.3302 low, this lateral chop could easily be just corrective/consolidative behavior ahead of a resumption of the uptrend that preceded it. Given obviously waning upside momentum however, a failure below 03-Jan’s 1.3494 low will render that low and initial counter-trend low and confirm at least the intermediate-term trend as down. Given the market’s proximity to the extreme upper recesses of the past quarter’s range however, such admittedly smaller-degree weakness cannot be ignored as an event that could open up more extensive, if intra-range weakness and vulnerability in the weeks and possibly months ahead. Per such shorter-term traders are advised to consider 1.3494 as our new short-term risk parameter from which any bullish policy and exposure can be objectively rebased and managed.
The past couple months’ recovery shown in the daily chart above is not unimpressive. But while 20-Sep’s 1.3658 high and key risk parameter remains intact as resistance, Nov-Dec’s rally arguably still falls under the umbrella of a recovery within a broader consolidation range that could still see a return to its lower recesses.

On a weekly close-only basis below, mid-Sep’s 1.3588 high is exactly a 38.2% retrace of Jun’15 – Mar’17’s 1.5883 – 1.2168 decline. And while a 46% reading in the Bullish Consensus ( can hardly be considered a “frothy” level of bullishness typical of major peak/reversal-threat environments, it nonetheless is the highest level in over three years. This 46% bullish reading won’t inhibit further and possibly steep GBP gains. But if the market fails below our short-term risk parameter at 1.3494 and reaffirms resistance from the upper recesses of the 3-1/2-month range, we believe it will contribute to a count calling for at least further lateral-to-lower consolidation.
Finally, from a very long-term perspective, we would remind traders that we believe the extent and impulsiveness of 2017’s rally is just the (1st- or A-wave) starts of a major, multi-year correction or reversal higher in sterling. In effect we believe 16Jan17’s 1.1988 low completed the secular bear market from Nov’07’s 2.1160 high. Within a major base/reversal PROCESS however, an often times extensive corrective retest of the low unfolds before major technical and fundamental events come into play to drive a more obvious and sustainable move.

Only a glance at the monthly log scale chart below is needed to see that the 1.35-to-1.38-area supported this market from Jan 2009 until Jun’16’s breakdown below it that left it as a new and major resistance candidate. The past 3-1/2-months’ price action constrained by that area would seem to reinforce this observation and suggest that the upper recesses of this range present a slippery slope for bulls.

These issues considered, a cautious bullish policy remains OK for shorter-term traders with tighter risk profiles, with a failure below 1.3494 threatening this call enough to warrant moving to a neutral/sideline position and circumventing the depths unknown of a correction or reversal lower. Longer-term players remain advised to maintain a cautious bearish policy with a recovery above 1.3658 still required to negate this call, reinstate the past year’s uptrend and expose potentially significant gains thereafter.


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