Though I think it best now to get past the non-farm payroll reaction tomorrow, the British pound is looking increasingly interesting as a long trade and a long-term hold based on the potential, we see in our Wave charts and the potential for a fundamental realignment of the their economy triggered by Brexit; i.e. unshackled from many EU regulations.

Three key points: 1) Prime Minister Boris Johnson has announced plans for major fiscal stimulus; 2) the Bank of England (BOE) has already talked about tapering or ending its QE program, we haven’t seen that elsewhere; and 3) Additionally, BOE officials are increasingly confident the economy will see a V-shaped recovery.

Though a stretch to say “tight monetary policy from the BOE,”, as we are not seeing that, but it may be fair to say there is a good chance we will see relatively tight monetary policy, especially if a V-shaped recovery in the economy does emerge.  Currencies tend to like loose fiscal and tight monetary policy.

 The weekly view hasn’t changed, though the Big Mac Index from the Economist (target as 1.68 level shown below) hasn’t been updated since January.

On a daily basis, a decent case can be made we have seen a minor corrective low at 1.2249, just above the 78.6% retracement of minor Wave (i). However, there are other plausible counts in play so suggest more range trade and a push down toward the 1.2074 (see next page).  Near-term resistance comes in at 1.2431, a 61.8% retracement of the latest swing.

To complete the minor A-B-C pattern in play, from the larger Gartley pattern, we get a push down to 1.2063.  That would be a better place to enter long, if we get there.

And, from the contrary standpoint, we see net negative positioning from the latest Commitment of Traders report. (And the larger spec traders in British pound futures tend to be more bullish and smaller punters.)