Morgan Stanley (NYSE:MS) picks GBP/USD as its technical FX chart of the week, where MS is medium-term bearish but sees the pair in a wide range over the next few months, and within this range there are set to be clear tradable moves.
On the 10-year GBP/USD chart:
"We believe that GBP/USD has completed a major multi-year corrective pattern, with the 1.7192 high of last year representing a 4th wave top. This implies that the early stages of a major 5th wave decline are currently developing, which has the potential to result in long-term GBP weakness against USD. Indeed, the long-term trendline from the 2008 lows has also been broken," MS notes.
On the 2-Year GBP/USD chart:
"Within the major 5th wave decline, the first wave lower of a 5-wave substructure is complete, we believe. Hence, the rebound from the 1.4566 low earlier in the year is developing a 2nd wave correction. The structure of this correction has the potential to be complex, leaving GBP in a wide range over the next few months. However, within this range there are set to be clear tradable moves," MS argues.
On the 90-Day GBP/USD chart:
"Indeed, the (a) wave of the 2nd wave correction appears complete with a top at 1.5930. An a-b-c structured (b) wave lower is now developing, with the final c wave lower under way. The move below the 1.5300 level confirms this bearishness and a further decline towards the 1.50/1.48 area is now likely. This would complete the (b) wave, allowing a (c) rebound towards 1.5819/1.5930 to complete the correction," MS adds.