Max  McKegg

                               Email:  TRL@clear.net.nz Tel. 64-4-479-0983

GBP/USD  last at 1.6310 - August 31st, 2011   

Sterling’s recovery from the June low of 1.5785 looks tired and from both Elliott Wave and Classical TA perspectives, there is risk of a significant sell-off ahead.

Under Elliott Wave analysis, Sterling is interpreted to be in the formative stages of a broad (c) Wave  decline, wherein if Wave (c) equals (Fibonacci) 1.618 times the distance of Wave (a), then a sell-off toward the 1.5065 level can be expected over coming weeks.

Under Classical TA analysis, a potential Head & Shoulders structure has been forming since late July, with a sustained break below the 1.6210 support level completing this Reversal formation, to yield a minimum downside objective of 1.5785.

However, in the “bigger picture” there exists not only a much larger Head & Shoulders pattern dating back to November of last year (refer Weekly Chart below) but Sterling is also entrenched within a multi-year Triangle structure

for which over coming months the next Triangle support will be encountered at 1.5100 - 1.5000 (right within the vicinity of the Elliott Wave target above).

Furthermore, within this multi-year Triangle formation, Wave D will equal (Fibonacci) 60% of Wave B at 1.5060.

The Bottom Line:  GBP/USD has likely completed three significant peaks this month; the first at 1.6745, the second at 1.6620 and the third at 1.6455 yesterday. This is probably setting-up a decline below 1.6210  toward the July low of 1.5785, initially. However, such a fall would likely be part of a much larger sell-off back toward the 1.5100/1.5050 area over coming weeks.

Disclaimer: Max McKegg & Technical Research Ltd accept no liability whatsoever for any loss or damage that may result, directly or indirectly, from any forecast, comment or opinion, information or omission, whether negligent or otherwise, within these forecasts.