Cable near term outlook:
No change as the market remains choppy since the Jun 1st low at 1.5270, still seen forming a pennant/triangle since that low. Though these are generally considered to be continuation patterns suggesting an eventual downside resolution, they will at times resolve in the opposite direction (upward in this case). Had been of the view that such a break higher was more likely (than normal) in this situation, as the market is/was consolidating near the base of an even larger, multi-year triangle (see longer term below). But the inability for stg to substantially outperform as the US$ has been consolidating over the last few weeks, and the seasonal chart that points sharply lower into mid September (see 3rd chart below), raise significant questions/red flags in regards to the potential for an upside resolution. A final comment, these patterns tend to resolve sharply, regardless of the direction. Nearby support is seen at the 2 week bullish trendline (currently at 1.5625/40) and the base of the pattern (currently at 1.5495/10), resistance is seen at the ceiling (cur at 1.5775/90).
Strategy/position:
Given the more neutral outlook in regards to the direction of the resolution of the triangle, would generally look to fade the extremes of the pattern (good profit can often be made by trying to capture some of the intra-range swings). Currently still long from the Jul 23rd buy at 1.5595, and for now given the risk that the ceiling holds again, would use a more aggressive stop on a close below the bullish trendline from Aug 2nd (currently at 1.5625/40), to maintain a good overall risk/reward in the position.
Long term outlook:
As mentioned above, the market continues to chop above the base of the larger, long discussed multi-year triangle that has been forming since Jan 2009. This triangle scenario raises potential for gains toward the bearish trendline from Apr 2011 (currently at 1.6175/00), and even the ceiling of the pattern (currently at 1.6525/50, see in red on weekly chart/2nd chart below). Though the confidence in this big picture scenario is lessening, an upside resolution of the triangle since Jun would greatly increase the likelihood.
Strategy/position:
At this point, the confidence of gains all the way back to the ceiling of the multi-year triangle is not extremely high (and even slipping a bit). But it still appears to be a good risk/reward area to have a bullish bias, given the somewhat limited risk (close below the base/Jun low would virtually abort). So for now, would maintain that longer term bullish bias that was put in place on Jul 11th at 1.5525.
