The markets are convinced of dollar strength, but when everybody thinks one way, it's usually a wise man who looks the other way. We were stopped out of USD/JPY today on a rather surprising show of New York strength that saw EUR/USD hold the 1.2800 figure, and a mighty 150 EUR/JPY rejection.

The wave count is a bit clearer in Cable and probably a better choice to play dollar weakness. You will have to bear with me because we're going to get fairly in depth with the analysis here. Wave 5 labeled in orange appears to be underway and is targeting 1.9250 towards the end of the summer. For now, we are calling for wave 3 of one lesser to degree to complete at a minimum target of 1.9075, within wave 5.

Moving down to the 30-minute chart we are focusing on positioning ourselves long within the context of 5th wave on the 240-minute chart targeting 1.9250. Within this new wave 5, we seen wave 1 and 2 of one smaller degree take formation. The end of wave 2 appears to be in place forming our favorite buy pattern, the Gartley, at 1.8850 clearing the way for wave 3 commencement. The minimum target of wave 3 is the .618 retracement of wave II at 1.8950. Ultimately, if this in fact a wave 3 within the larger 5, wave III should travel at a minimum to 1.9075, and likely beyond. 1.9075 is wave III equality as compared to wave I.

So, the trade is to buy GBP/USD between 1.8845-65 with stops for half at 1.8825 and the other half at 1.8765 targeting 1.8950 on partial position. Then, if 1.8950 deals, move your stop to breakeven targeting 1.9075 on the remaining position.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.