By DailyFX – GBP/JPY * GBP/JPY continues to fluctuate in a wide zone bound by 211.00 and 203.75. We have focused on the recurring pattern… … of the pair making “its biggest one day gain or close to it on the last day of its rally” (5/4 daily Technicals) before dropping off in a rush of selling.

This happened again last Thursday as the pair
approached the 4/19 high at 210.78 before plummeting yet again. The pair has
rallied substantially today but has stalled at the confluence of the 20 day SMA /
38.2% fibo of 210.98-205.39 at 207.53/60. As the range continues to contract within
the large triangle, we can calculate when we would expect the pair to break out.
Projecting the lines from the triangle gives sets the apex at 8/24/2006. The
consolidation began after the high made on 12/12/2005 * this is a difference of 8
months and 12 days. Breakouts typically occur within between two-thirds to
three-fourths of the way through the triangle. This gives us dates for a potential
breakout anywhere between 5 and one-third to 6 months after 12/12/2005 * or
5/24/2006 to 6/12/2006. Until then, the greatest probability is that GBP/JPY trades
within the large triangle.

GBP/CHF * GBP/CHF continues to trade within its large triangle as well but has
significantly strengthened today taking out the past 9 week's highs before rejection
at the 76.4% fibo of 2.3053-2.2446 at 2.2909. The dealer chart shows a double top
from the 3/24 and 5/11 highs at 2.2900. Daily oscillators are bullish with CCI >
100 indicating that momentum is extreme but if the indicator falls below 100 then a
turn to the downside is a definite possibility. A daily close above the mentioned
2.2900, now initial resistance, would strengthen any bullish argument. Support
stems from the 23.6% and 38.2% fibos of 2.2449-2.2913 at 2.2804 and 2.2736.

GBP/AUD * GBP/AUD also trades within a consolidation pattern, albeit a very tight
one that began after the downtrend from 2.4843 to 2.3664. Any intraday breaks above
the upper line from the rising triangle near 2.4225 face resistance at the
confluence of the 50% fibo of 2.4843-2.3664 / 5/9 high at 2.4253/80. Any breaks
below the line near 2.4075 encounter the confluence of the 50% fibo of 2.3667-2.4279
/ 5/10 low at 2.3972. This pair could break in either direction but momentum favors
bulls as evidenced by RSI > 50 and positive MACD slope. A bullish outlook is
bolstered by the inverse head and shoulders (evident on hourly and dealer charts) as
well as the fact that rising triangles (daily) are often bullish. In any case, the
tightening of the market presents superb risk to reward opportunities regardless of
which way the pair breaks.

Jamie Saettele
Technical Currency Analyst
Forex Capital Markets LLC
New York, NY 10005
Tel (212) 897-7660
Fax (212) 897-7669
Toll Free 888-503-6739
jsaettele@dailyfx.com