Jun 042009
Live Elliott Wave GBP/USD 4 June 2009

Live Elliott Wave GBP/USD 4 June 2009

Just a few days ago, on 27 May precisely, when the GBP/USD was at 1.5983, Wave Times suggested that according to the Elliott Wave Principle, the GBP/USD or Sterling Pound was vulnerable as it approached the prior fourth wave level of 1.6670. Yesterday, the GBP/USD reached 1.6671, just a whisker short of the elliott wave target, and embarked on a sell-off that even took me by surprise. We saw a low of 1.6208 within 24 hours when some GBP supportive numbers allowed for a rebound. What we are interested to know right now is whether this sell off marks the beginning of the move to the low 1.30s as suggested in Wave Times in its current medium term update of 27 May 2009.

My response is that it is not easy to kill a raging bull. So allow for several sessions of back-and-forth moves, during which we could dip to 1.5920. So far, we have seen a 50% pull-back of the initial wave down from 1.6671 to 1.6208. A 61.8% recovery lies at 1.6487. See what happens there. If we get a fast sell off to 1.5920 from near 1.6490, then we can gain in confidence that the move has actually begun, and so look to sell decent corrections afterwards. In any case, traders following elliott wave analysis would already be rubbing their hands in glee after yesterday’s move. We will monitor GBP/USD closely, and give you current updates when anything significant happens.

May 272009
Medium-term outlook on Sterling Pound

Medium-term outlook on Sterling Pound

Back in March, when Sterling was trading around 1.4450, I wrote in the FX Trader magazine, and reproduced in Elliott Wave Magic, that we are likely to see the currency approach 1.6170. The currency has today reached a high of 1.6039 and is entering a period of consolidation. What is the medium-term outlook for GBP/USD?

The practice of Elliott Wave Analysis is more an art than science. In order to be successful, one has to be willing to suspend disbelief, and stay truthful to his/her count. It is also important to be able to “adapt to the road” while we drive towards our destination. There may be a need for a slight detour that was not planned for originally, but so long as you have not flouted any rules of the game, you are still ‘playing’. At the time of making the original forecast of 1.6170, the potential for 1.6670 was always there, but given the hurdles around 1.4900, it didn’t seem right to point to the far-out objective. Now that we have reached 1.6039, one can start looking at how far the move can go, and what is likely to happen thereafter.

Allow for another go at 1.6040-90 now, but assuming we fail to stay above that level for long, we should enter into a period of consolidation. During this period, a decline to 1.5770/1.5600 is possible, but another rally should materialize from down there. That rally will be able to go at least back to 1.6090, and possibly 1.6320. Investors should start getting out of Sterling Pound denominated assets when we reach the 1.6320-50 levels and not wait for the final target of 1.6670. Those last 300 pips are not worth the trouble because we are looking for a much bigger move on the down side, a move that can potentially go back to 1.33 area.  Remember the golden rule that you can be a successful trader/investor only when you follow sound money-management principles. Elliott wave analysis will help you think through potential trades, but you have to have not only the courage to take the trade, but also the discipline to keep any losses small. Good luck.

Dec 042008

The Sterling Yen cross has been a big mover in recent weeks, because not only the Pound got thrashed, but the Yen also strengthened simultaneously. Naturally, traders hop on board any trend that is clear! Here is you chart on Sterling Yen (GBP/JPY) with Elliot wave counts and comments written on the chart itself. I wrote it in the morning, when the Pound was at 136.58 and the low for the week was 136.27. (You can see the open/high/low/close data on the top left side of the chart). The first target was 134.60, but we have already been there, even before the Bank of England cut interest rates by 100 bp, and informed the world that “further depreciation in Sterling should moderate impact of global slowdown on UK”. Now if that isn’t an open invitation to stay short of Sterling, what else is? Do you think the BOE will intervene to prop up the Pound after this statement? So use recoveries to every resistance levels to sell the Pound, of course with close stops. A good initial resistance is 140.80 (but there is mild resistance even at 136.50 137.50 levels). We need to be patient because the cross has reached its earliest target, and maybe there will be a bout of profit-taking that will allow us to initiate low risk trades on the short side? Take care. I’m off on holidays for 10 days, but will try and stay in touch with you as often as possible. Enjoy!  Ramki

Nov 242008

Whenever a currency or commodity or stock moves rapidly and too far, it sets itself up for a period of consolidation. As you are aware, Sterling has dropped like a stone from its peak, and after reaching its medium-term target of around 1.4570 (discussed earlier in this blog), the currency has been moving sideways. Today, it looks a bit better bid, and there is a chance that some short-covering could kick in. If such a recovery takes place, we should still be on our guard around 1.5365 because the Pound is very much still in a major bear trend, and will surely come down a lot faster than it can climb higher. I have presented a chart with some gann fans on it. There are other reasons why I think the Pound will find it tough to go above 1.5410. But any place near 1.5365 should be enough for those who are still stuck with bad ‘long’ positions in the Sterling Pound to swallow the medicine and take a loss. For those who need to hedge their exposures, this recovery(assuming it happens) will give you a decent level to take action. Enjoy!  Ramki.

Nov 192008

Today’s headlines read the Bank of England were considering whether BPthey should cut the base rates by more than two points on November 6, but settled for a 1.5% cut so that they would have room to cut later on, and bolster confidence. Why is the Pound gaining ground (even if only limited ground) when faced with the prospect of further rate cuts? Obviously, it is all a matter of supply and demand at any point in time. For example, today Merrill Lynch has been mentioned as big buyers of Sterling related to Middle East investment into Barclays! Another rumor is MLL has an option payout if Sterling is above 1.5100 at ECB fix today. Bear in mind that these are only market rumors, and frequently, rumors are floated by interested parties. Being traders with limited resources, most of us should wait for low risk entry levels and position with the major trend. The trend for Sterling is still down. I see significant resistance around 1.5220 and so will be trying a small short if and when we get to near 1.5210 in the next 24 hours. If we don’t get here by tomorrow, I will forget this idea and move on! Take a look at the accompanying Sterling chart. As usual, I have drawn some Fibonacci retracements, but the key is really Elliot Wave Analysis, and Wave Analysis is more than drawing Fibonacci retracements! Enjoy.

Nov 142008

Just a quick post to record the fact that the Sterling Pound has met its larger objective near 1.4570 last night and bounced sharply. (refer this post that says stay short in sterling for now). It has been a very tough week for most traders and most are licking their wounds. The question many finance managers will ask me when I return to work after the weekend is whether we will get another dip in the Pound to buy! Provided we don’t run away to the upside, we should get a decent move to retest the downside. It is typical of markets to make sure that the bottom is a strong one. We will look at the charts on Monday and determine our next move in the currency markets.

Nov 132008

By now you would have realized that what this blog is attempting to do is to give you a sense of direction, and also highlighting pressure points. The most recent example of the value of some of the charts I post here is the call on Sterling yesterday. Take a look.

Here is yesterday’s post for easy reference.

Nov 122008

The Governor of the Bank of England, Mervyn King, has said today that the UK is probably in recession now and 2009 is going to be difficult. He also asserted that he stands ready to cut interest rates again if that is required. Clearly, we need to remain short in Sterling. (Early resistances come at 1.5345 levels). I am posting two charts for your use today, suggesting a short-term target of 1.5090 and 1.4865. But in the bigger picture, we will likely see a test of 1.4570. Remember one thing, folks. We are not using technical analysis to predict the future. We are trying to organize the way we trade into safe compartments. So, when I have 1.5090 as one objective, I will take back a good part of my shorts near there, but be ready (like Mr King) to sell the Pound again if that level breaks. If the analysis helps us to re-enter at better levels, then that is great! Good luck.

Nov 062008

I warned you folks about this chop in Sterling Pound . In just 40 minutes, Sterling had dipped from 1.5830 to 1.5720 and raced higher to 1.6020. What should one do in such a market? The most sensible thing to do is to go out for a snack. Why get involved in the middle of a deadly game? Wait to see if we get to 1.6450, and maybe sell a small amount there. If it goes down directly, well, nothing is lost. I always believe that money not lost is money gained. Enjoy your weekend. Ramki.