Cable has fallen sharply to a low of 1.6136 this morning in the failure off the 1.6401 top yesterday. Looking at the move in the context of the weekly chart, one can see a symmetrical triangle with what looks like a corrective move off the 2009 low of 1.3503. There has been a series of three wave moves so far. While it has been tantalizing watching price nibble at the upper boundary, the probability is for a move back towards the triangle low at 1.4725.
Obviously, if it rallied and managed to take out the 1.6401, it would be significant. There still is a daily flag target of 1.7215. This is a valid target if one is bullish.
However, I'll confine this post to the downward potential. Three wave moves within a triangle from an Elliott perspective often relate by a Fibonacci number. These are close, but not spot on. The move from 1.7049 to 1.4229 was 80% of the move from the 1.3503 low. The move from 1.4229 to 1.6401 was 77% of the prior move.
Instead of discussing a triangle, one could also just assume an ABC correction where the C leg at 1.6420 was .618 of the A leg. This is close to where it failed yesterday.
On the way to 1.4725 Cable would find strong support at 1.6000. On the three-hour chart, this is the lower boundary of the channel I previously posted and 1.5982 was the last swing low on that chart. There, one could look at a long position but watch momentum and price behavior carefully.
I'm short this pair so I'll blog about it.
Here's the weekly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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