Forex Technical Analysis 27 September 2007

GBP/USD: Short Term Bullish Setup

The trendline from June of 2006 continues to support the GBPUSD and both our preffered an alternate wave counts are near term bullish. The reward to risk ratio on this trade is at least 2:1 but we plan on trailing the stop with this trade. As always, updates are published daily on current and new trades at DailyFX+. We began publishing this report in May and the trades have generated a net profit of 2,465 pips (not including the AUDCAD open trade) so far.

GBPUSD Current Vcalue: 2.0150
9/26/2007 12:59 PM

Buy Now
Stop: 2.0080
Target: TBD (likely somwhere between 2.0440 and 2.0590)

The daily shows that the trend remain up following cable's bounce from trendline support in Augus. The decline from the top is either wave A (favored) of a larger A-B-C decline or the entire A-B-C correction (alternate).

The 2.0654-1.9651 decline was clearly in 3 waves. For this reason, we know that a correction is either complete at 1.9651 or that a larger correction is underway (will complete below 1.9651). The advance from 1.9651-2.0366 is most likely either wave A of a 3 wave advance from 1.9651 or wave 1 in a new bullish cycle from 1.9651. The decline to 1.9879 is either wave B or 2 of the structures mentioned. Either way, wave C or 3 is underway now and will not end until clearing 2.0366. Meansured objectives for the end of the rally from 1.9879 are 2.0439 (78.6% of 2.0654-1.9651) or 2.0593 (where the rally from 1.9879 - 1.9651-2.0366 rally).

Zoom in even closer and you can see why we are bullish at the current juncture. The 1.9651-2.0366 rally was a 5 wave advance and the decline from 2.0366 was in 3 waves. This strongly indicates that 2.0366 will be exceeded. As mentioned before, a large C wave or 3rd wave is underway from 1.9879 and a series of 1st and 2nd waves is already complete therefore we can limit risk to 2.0084. We are not specifying a target now because of the bullish potential that arises is this indeed a 3rd wave. We will publish targets at DailyFX+.

By: DailyFX

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