In cable, the longer term view is unchanged as the last few months of choppy trade is seen as topping, forming a bearish head and shoulders over that time. Though this suggests an eventual downside resolution, there is scope for another week of 2 of ranging/nearer term upside within the pattern first (see “ideal” scenario in red on weekly chart below). Note too that the macd has recently given a new sell signal (see bottom of weekly chart below), adding weight to the view that a week or 2 of gains (if it does indeed occur) would be seen as part of a larger topping, and not the start of a major new upleg. Switched the longer term bullish bias from March 27th at 1.4300 to neutral on Aug 26th at 1.6235, as the longer term upside potential was not enough to compensate for the rising, longer term risk. For now, will allow this longer term topping to continue playing out, but with the expectation of switching the longer term bias to the bearish side a week or 2 ahead (and likely at higher levels).
Nearer term, the market is consolidating from the late Sept low (and test of the neckline of the large head and shoulders near 1.5800), and as mentioned, there is scope for a few weeks of gains (potentially sharp) with the multi-month topping pattern. Note too that this fits the broader $ view of weakness into the mid Oct timeframe before completing a potentially major top (nearby gains in cable), while eur/gbp is seen as topping with at least a few weeks of correcting lower after (would help support cable). Long from the Sept 29th buy at 1.5930 and for now, would continue to use a wide stop on a close below 1.5745/55 (just in case of a temporary break of the recent 1.5795 low). However, will want to trail the stop with the market on near term upside, and getting especially aggressive on approach of the mid Oct timeframe and/or the area of the shoulder of the head and shoulders pattern at 1.6700/50. Resistance before there is seen at 1.6115/25 (last week’s high) and 1.6150/65 (38% from the Sept 11th high at 1.6740), while longer term support below the 1.5790/10 area is seen at 1.5675/00 (38% retracement from the Jan low at 1.3505).
