Cable near term outlook:
As been discussing for quite some time, the market has been forming a triangle type consolidation since June. Also despite these generally being seen as continuation patterns suggesting a downside resolution, have been arguing that an upside resolution in this case was more likely (forming near base of larger, multi-year triangle, see longer term below, also the broader US$ is within a month or so period of ranging lower). Note that the market did indeed break above the ceiling at 1.5770/90 yesterday (see daily chart below), arguing further gains ahead (potentially a lot higher, see long term below). But with the seasonal chart weakening over the next few weeks (before rallying into the end of the year, see 3rd chart below), the near term upside may be more rangy (at least initially). Support is now seen at the broken 1.5770/90 area and the bullish trendline from Aug 2nd (currently at 1.5670/80), while further resistance is seen at 1.5910/20 (62% from the Apr 30th high at 1.6300) and the ceiling of the bullish channel from June (currently at 1.5980/90).
Still long from the Jul 23rd buy at 1.5595, and with the recent upside break of the triangle since June arguing further gains ahead, would stay in that position. Also, would continue to use a fairly wide stop on a close below the bullish trendline from Aug 2nd (currently at 1.5670/80), to allow for potential rangy upside nearby.
Long term outlook:
Long held view remains unchanged, as the market continues to form a huge triangle/pennant since Jan 2009. With the Jun low at 1.5270 testing the base, there remains potential for gains to the bearish trendline from April 2001 (currently at 1.6175/00) and even the ceiling of the pattern (1.6525/50, see in red on weekly chart/2nd chart below). But with the broader $ downside seen more limited over the next few weeks, stg would likely have to outperform on the upside in this scenario.
At this point, the confidence of gains all the way back to the ceiling of the multi-year triangle is not extremely high, though the recent break above the triangle since June has increased it. But as been discussing, still makes for a good opportunity to have a longer term bullish bias, given the somewhat limited risk (close below the base/Jun low would virtually abort, making for a good overall risk/reward in the position). So for now, would maintain that longer term bullish bias that was put in place on Jul 11th at 1.5525.