Wednesday’s call for a strong post-wedge rally was driven also by a strongly bullish hammer reversal candle, so far the Pound has rallied strongly and we expect the correction higher to continue in the near-term. The sell-off from 1.64 was clearly a 5 wave affair but now a rally underway to retrace some of that downtrend. It is not uncommon that a major break (the move below 1.53) will experience a test before further losses mount. S/t, the rally so far has been impulsive and already has traced 3 of 5 waves up on the hourly since breaking the downtrend and wedge resistance. We view this as Wave A of an unfolding A-B-C correction. The first major resistance will be the recent pivot high/old 2.5 year support level at 1.5200/50. Following, a pullback another rally can complete Wave C of a zig-zag correction and possibly better the 1.53 level before the downtrend resumes. Levels: Support – 1.5103, 1.5069, 1.4981 Resistance – 1.5217, 1.5250, 1.5350.
Nomura