At week end, trying to place the current position of cable in perspective.
From a long term perspective we have an impulsive pattern that completed itself around the 1.35 level. This pattern seen on a weekly and daily charts.
This pattern can be seen in more detail in a series of 8 hour charts.
The move began last summer when gbpusd first began to seriously distance itself from the 2.00 level. After falling from the November 2007 high above 2.11, the market had fallen as low as 1.93 by late January 2008, but until August of 2008, it continued to probe the 2.00 level. The psychology of the market was such that a new bull move above 2.00 seemed plausible. But then in August of 2008 it dropped sharply through 1.90 and, in a 3 wave movement (the second "up" wave short and horizontal) fell to a low of 1.7443 on September 11, 2008.
This low was the end of what would become an alpha wave of an alpha beta base. A subsequent retracement up to a high of 1.8667 on September 25 would form the beta wave.
This alpha-beta base pattern would posit the following:
- A 1.618 delta target zone around 1.6687
- A 2.618 delta target zone around 1.5463
- A 4.236 delta target zone around 1.3483
The subsequent pattern seemed to coalesce around these levels. The initial move down from the beta high stopped at the top end of the zone of the 1.618 target, moved back up, testing and failing to break decisively above the alpha low which began the pattern definition. Then it fell with greater impulsive energry through the 1.618 level, spiking down through the 2.618 level, but finding support right at the bottom of that level's zone.
It then moved back up to the 1.618 level, found resistance and turned around again, falling sharply through the 2.618 level, finally finding some support at the minor Fibonacci 3.33 level in mid November.
From that point until mid January 2009 the market oscillated between the 2.618 level and the 3.33 level (with a slight downward bias--a succession of slightly lower lows).
Then on January 16 it began its final wave down, finding a bottom at the 4.236 delta target zone. on January 23. (The theoretical 4.236 target was 1.3483, actual low was less than 20 pips higher.)
Since then the GBP has bounced above the previous support line slightly above 1.46.
This bounce has come in a three wave corrective pattern that has internal consistency and could be seen to end with the 1.4983 high on Monday, February 9, 2009.
Again, the 1.35 low on January 23 is significant only in that it completed a pattern begun last summer. It is not to say that cable cannot go lower, only that it would require a new downward pattern which has not yet begun to form.
