Cable continues to make multi decade highs, so where is resistance? A well defined bullish channel along with sentiment indicators that are not yet extreme favor the upside until at least 2.1100. Wave structure and Fibonacci levels pinpoint levels for entry and define risk. Find out where these levels are.
This is the chart from our Daily Technical report. The resistance line from the well defined bull channel is near 2.1106 today and increases about 6 pips per day. A rally to trendline resistance could give way to a top and reversal.
One reason to expect additional Cable gains is the sentiment backdrop. Major tops occur at optimistic (bullish) extremes. We gauge the psychological state of the market by analyzing COT data. The red indicators are longs expressed as a percentage of total open interest for commercials and speculators (top oscillator is commercials, second oscillator is speculators). The next two oscillators are the difference between commercial and speculative positioning expressed through 52 week and 13 week percentiles (52 is the third oscillator and 13 is the fourth oscillator). A bullish extreme occurs when commercials are extremely short (top red line near 0), commercials extremely long (second red line near 100), and the difference between commercials and specs is large (blue lines near 100). When at least 3 of these things line up as described, the probability of a turn is high. Because our indicators do not indicate a psychological extreme, the probability of a top and reversal at the current juncture is not high.
The short term wave count has not been very clear as of late but the count proposed on this chart is possible. The choppy up, down, up, sideways price action from 1.9651 to 2.0258 could be a series of 1st and 2nd waves. Under this interpretation, the GBPUSD is likely to correct in a small 4th wave, possibly to the 23.6% of 2.0258-2.0895 at 2.0744 before a new high is registered in wave v. Wave b is expected to test the 161.8% extension of 1.9651-2.0366/1.9879 at 2.1035 (just below the resistance line shown on the daily chart).
The GBPJPY chart sheds some light on the outlook for the GBP in general. Price should work higher from near current price in order to complete a large complex correction (W-X-Y) from 219.30. Wave Y of the complex correction is unfolding as an impulse; a new high (above 241.35) is required in order to complete the advance. A drop below 237.09 is possible before the rally to 241.35 begins but weakness should prove marginal.