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Elliott Wave Analysis on GBP/JPY
07/07/2010 12:01 am EST
The British pound has continued to trade in a familiar range as suggested and further consolidation could be seen, however, as the move from 126.80 is still treated as correction, as long as resistance at 136.40 holds, we are keeping our bearish view for weakness to 130.40/50. However, a daily close below there is needed to confirm the correction from 126.80 has ended at 136.40, then weakness to 129.00 would follow. Looking ahead, break of said support at 126.80 is needed to signal the wave iii is still in progress for weakness to 125.00 and then 124.60 (100% projection of wave i), however, reckon 120.84 (1.236 times projection) would hold from here.
Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, second a ended at 162.60, second b at 146.75, and second c leg of wave four ended at 163.00. Therefore, the decline from 163.00 is the beginning of wave five with minor wave i of five ended at 132.05, followed by wave ii, which has ended at 145.95, hence wave iii is unfolding with minor (i) ended at 130.00, (ii) at 140.55, and wave (iii) is in progress for further fall to aforesaid downside targets.
On the upside, only above 136.40 resistance would signal temporary low has been formed and risk stronger rebound to 138.00 before prospect of another selloff.
Recommendation: Hold short entered at 134.50 for 130.50 with stop at breakeven.
The long-term downtrend from 570.99 (February 29, 1980) is labeled as an impulsive wave with III with circle ended at 129.77 (April 20, 1995) and the corrective rebound to 251.12 (July 20, 2007) is treated as wave IV with circle and the wave V with circle selloff from 251.12 is still unfolding and will bring another test of 118.87 low, possibly in Q4, however, further steep fall below there is unlikely and 115.00 shall contain downside.
By the Staff at ActionForex.com
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