The British Pound crosses should continue to bounce with the GBPCHF appearing the most bullish near term. Longer term bullish reversals may be underway in the GBPCAD and GBPNZD.
There are 5 waves down from the October high at 2.4205. This may comprise wave 3 of what turns out to be a 5 wave drop from 2.4963. Under this count, a 4th wave is underway now and could test the 38.2% of 2.4205-1.9421 at 2.1249. This intersects with the former 4th wave as well. Risk on longs should be at 1.9649.
There is no change to the idea that “a major bullish base has formed”. We view rally from 1.9011 to 2.0906 as the first wave in a bull cycle and the drop from 2.0906 to 1.9307 as the second wave in that bull cycle. Whether the cycle proves to be 3 or 5 waves does not matter at this point. Both scenarios call for a rally through 2.0906 in the coming months. This bullish outlook remains intact as long as price is above 1.9794. A clean break through the 200 day SMA would inspire confidence in the bullish bias.
The count in the GBPAUD is not clear at this point but the series of lower highs since August 2007 keeps the bear trend intact. The downtrend is reinforced by a resisting trendline drawn off of the 8/17/07, 12/18/07, and 3/20/08 highs. The downtrend is strong as long as price is below 2.2133.
The GBPNZD broke through a 6 month resistance line early last month and has held above that line for 1 month now. This kind of action suggests that a large base is forming and that the GBPNZD is headed higher in the coming weeks and months. The outlook is bullish as long as price is above 2.4474.
