Longer term in eur/gbp, the market has broken above key resistance at the bearish trendline from Dec 2008 (currently at .8770/80), aborting the view of a final downleg below .8400, and suggesting that an important bottom is already in place. Note too that the market may have completed a large, 3 wave correction from Dec (A-B-C, see numbering on weekly chart below) suggesting new highs above .9800, while the weekly macd has recently given a new buy signal (see bottom of weekly chart), adding weight to this bigger picture bullish view. So for now, would have a longer term bullish bias but there is some risk that the upside may be an extended period of wide, upward ranging.
Nearer term, as mentioned above the market has broken above the key bearish trendline since Dec. Note too that the upside pattern is not yet “complete”, currently within wave 3 in the rally from the Sept 4th low at .8710 (see numbering on daily chart/2nd chart below) and suggests further upside ahead. Note too that the market may also be within wave 3 of 3 within that upmove, often the most “explosive” part of a cycle, and raises the potential for a further upside acceleration ahead. Took profits and reversed to the short side on the Aug 28th initial approach of that longer term bearish trendline (then at .8810). Had said to use a close above that trendline (incorporating the Sept 10th spike above) as a stop but given the potential for a further upside acceleration nearby, would just stop and reverse to the long side here (currently at .8865). For now, would use a close below the bullish trendline since Aug (currently at .8735/45) as a sign to stop. Next resistance is seen at .8930/40 (38% from the Dec .9800 high) while nearby support is seen at .8830/40 (earlier late Aug high).
