I like being short Cable with a stop at 15770. The target is 15350. The GBPUSD broke its diamond top last week and the trend is down against 16076. The rarity and reliability of the diamond pattern makes the break especially bearish. Given the 3rd of a 3rd count from 16464, the first Fibonacci confluence is not until 14714/62. The reversal occurring at the 38.2% / Elliott channel resistance strongly favors the idea that the rally is a 4th wave. 15338 is where wave v (if it is a v) would equal wave i. Favor the downside.

It is true that the British pound is still significantly undervalued on a fundamental basis; but the qualifications for such a claim are far more difficult to make after yesterday’s BoE Quarterly Inflation Report. In this assessment of economic activity and monetary policy, the central bank first moved to lower its projections for growth and inflation through next year. For rate watchers, the suggestion that price pressures will hold below target for the next few years (after a temporary peak at 3.3 percent) has dramatically culled the potential for a rate hike anytime this year. Bank Governor Mervyn King confirmed these suspicions when playing down the previous rate decision to pause bond purchases and suggesting it was "far to soon" to say the program would not be expanded in the future. With this, growth and interest rate projections are working to erase a little of the premium the currency won over the past few months in finally climbing out of recession and the MPC’s gradual shift towards neutral.

As for positioning, there are a few opportunities across the board; but the open trades I have carried over look to have the best potential. The short EURGBP setup I have carried for some time now was briefly in the red overnight with a quick move above the 200-day SMA. However, a market clearly discouraged by the lack of details on the EU’s bailout plan for Greece would help weigh this pair down and in turn confirm former support and a medium-term bear trend. A more recent position, my short GBPUSD from Tuesday was entered just below the eight-month range low that was broken last week. Loose but clear support has developed around 1.5530/70. A break from this congestion is essential. I’m sticking with a bearish bias and ready to move my stop up. Other pairs that I am watching but not ready with a plan are GBPJPY and GBPAUD. The former has established a tight, terminal congestion pattern at the very bottom of a wide range. A short-term breakout is inevitable; and depending on how it plays out, the result could be significant.

I sold GBPUSD at 1.5765 as prices issued a daily close below the 1.5800 figure, a major support in place since May 2009. The pair has indeed moved lower and is now working through support at the 1.56 figure. We will remain short, continuing to target 1.5291. A stop-loss will be activated on a daily close above 1.6000.

I have remained short GBP/USD since a break below 1.6100 following the breakout from a wedge formation but we have started to see the pair consolidate which is why I have decided to take profits at this time. I was expecting the dovish remarks from the BoE following the quarterly inflation report to weigh further on the pair. Governor King stated that "it is far too soon to conclude that no more purchases will be needed. So the Committee will keep its options open and further purchases will be made if they prove necessary to keep inflation on track to meet the target in the medium term." I will remain in the sidelines until a break below 1.5500 or above 1.6000. There is very little that will shape interest rate expectations until the next policy meeting, as the MPC is forecasting that inflation will fall below its target level of 2.0% which will limit the impact of upcoming consumer price data.

The EUR/GBP pushed to a fresh weekly high of 0.8844 during the overnight session, which triggered the short entry I had at the 200-Day SMA (0.8830), but has pared the advance and has fallen back below the 0.8800 level ahead of the North American trade. As a result, I will look to maintain the short position and will keep the target at 0.8650, the 1/20 low, with the stop at 0.8889, the 50-Day SMA. However, I look to move down the stop to cost if we see the exchange rate slipped back below the 20-Day SMA (0.8737) by the end of the U.S. trade.

The market has retraced sharply in early trade on Thursday, with the cross collapsing in a matter of hours all the way back to the 78.6% fib retrace off of the recent 1.5415-1.5955 move. However, any additional setbacks from here are seen limited, with our core bias favoring the formation of a major base at current levels, given the overextended longer-term cyclicals. As such, we are looking to take advantage of these sharp pullbacks in anticipation of the decline being very short-lived and potentially the last shot to establish a very compelling position so close to what could be a long-term low at 1.5415. POSITION: LONG @1.5525 FOR AN OPEN OBJECTIVE; STOP 1.5325. POSITION SIZE IS 3X TOTAL EQUITY.

LONG EUR/CAD POSITION ALSO TAKEN ON THURSDAY AT 1.4510 FOR AN OPEN OBJECTIVE; STOP 1.4360.