Cable: Another Upleg Above 1.3480

Cable near term outlook:

In the July 13th email, we said at least another few weeks (and likely longer) and good sized swings in both directions was favored. The market has indeed swung widely since, pushing to a temp high at 1.3480 on July 15th and before quickly turning back down.

In the big picture, lots of positives suggests eventual gains back to that 1.3480 and above. They include bullish technicals (see buy mode on the daily macd) and a potential, inverted head and shoulders pattern since June.

Note too that the upmove from the Jul 6th low at 1.2795 to that 1.3780 high occurred in 5 waves (see numbering on daily chart) adding to the view of further highs (upside not “complete”). Very near term there remains scope for another few days/week of correcting/consolidating before resuming the upmove but further near term downside would likely be limited.

Additionally in the bigger picture, the magnitude of the gains above 1.3480 is a question as the market may still be within that extended period of wide ranging from the lows, so will be looking to quickly reassess on such upside.

Nearby support is seen at 1.3030/60 (earlier low, area of right shoulder of the potential head and shoulders pattern) and the bullish trendline from the Jul 6th low (currently at 1.2960/75). Nearby resistance is seen at 1.3270/85 and the neckline of the pattern (currently at 1.3470/85). Bottom line : upside pattern from the Jul 6th low at 1.2795 not “complete” targeting eventual gains above 1.3480.

Strategy/position:

Reached the sell target from the July 13th email at 1.3375 on July 14th. At this point with another upleg above 1.3480 favored and any further near term downside likely limited, would take profit here (currently at 1.3175 for 200 ticks) and even reverse to the long side. However, with scope for a further period of bottoming nearby would initially use a wide stop on a close 25 ticks below that bullish trendline from the July 6th low.

Long term outlook:

No change as the market has continued to consolidate from the July 6th low at 1.2795 and test of that very long term falling support line from Feb 1993. Remember, markets often go through very extended periods of broad ranging after market “shocks” such as Brexit and continues to argue at least another few months of this wide, rangy type action ahead.

Note the series of approximate 8 year bottoms since 1985, occurs again early in 2017 and adds to the view of at least another few months of bigger picture ranging, likely as part of a more major bottoming (see weekly chart/2nd chart below).

Though this timeframe is likely to long for most, it does provide good background information and adds to that nearer term view of gains above the Jul 11th high at 1.3480. Further big picture resistance above there is seen at 1.3640/65 (38% retracement from the Jun 24th high at 1.5020). Bottom line : another upleg above 1.3480 favored, but likely part of this much longer term period of wide ranging.

Strategy/position:

Also switched longer term bias to bearish on Jul 14th at 1.3375, but with another upleg above 1.3480 favored, would also reverse the longer term bias to bullish here (currently at 1.3175).

Current:

Nearer term : short Jul 14th at 1.3375, took prof/rev to long Jul 20th at 1.3175 (200 ticks). Last : short Jun 23rd at 1.3675, took profit Jun 30th at 1.3460 (215 ticks).

Longer term : bear bias Jul 14 at 1.3375, reverse to bullish Jul 20 at 1.3175 for gains above 1.3480.

Last : bear bias Jun 23rd at 1.3675 to neutral Jan 30th at 1.3460.

Daily GBP Chart

Weekly GBP Chart

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