Cable has turned lower, taking out key support at 1.6265/80 (both the base of the bullish channel since June and the Aug 17th low), and raising the potential for a further downside acceleration ahead. From an Elliott Wave perspective, note the series of subwaves over the last few weeks, and adds to the potential for a large tumble from here within wave iii of 3 in the fall from the Aug 5th high at 1.7040 (often the most “explosive” part of a larger cycle, see numbering on daily chart below). Still long from the Aug 12th buy at 1.6525, but will want to stop and even reverse on a close below the 1.6265/80 support area (then use a close above the bearish trendline from early Aug as a sign to stop). Nearby support is seen at 1.5985/00 then the June 8th low at 1.5810. Also if such a move does indeed occur, it will no doubt give at least some support for the $ versus other currencies.
Longer term, a close below the 1.6265/80 support area (and potential for a downside resolution, see above) would pose just too much downside risk to maintain the longer term bullish bias that has been in place since March 27th at 1.4300, and would switch to neutral on such a close. However, it would not necessarily be seen as completing a major top (with significant declines) but more likely a larger period (multi-month) of wide ranging/topping, with some potential for final new highs above 1.7040 over the next few months, so would not switch to a bearish bias for the longer term. Note too that important longer term resistance lies above the 1.7040 high at 1.7315/40 (50% from the Nov 2007 high at 2.1160), and markets do have a way of eventually reaching these key levels - just may take a number of months of wide ranging/topping in this case.
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