picking tops and bottoms

-Weekly RSI positive cross
-Breakout opportunity against 126.40
-Measured objective above 138

GBPJPY has been confined to an intense downtrend over the past several months with the cross rate trading to fresh life-time lows by 118.85 last Friday ahead of the latest minor bounce. However, the price action this week has been quite constructive with the market putting in a fresh higher low on each day. Additionally, it is worth noting that the lifetime lows by 118.85 have directly coincided with former trend-line-resistance (30Oct high) now turned support. Although weekly studies remain in oversold territory, the weekly RSI looks to be on the verge of a positive cross for the first time since March 2008 where we saw a 20 big figure move to the upside. Positive crosses in the RSI on the weekly chart have been few and far between over the past 20 years and each time the bullish signal has yielded a major shift in the trend, with the one exception of March 2008 where we still saw significant upside before bear trend resumption. As such we recommend looking to buy the cross next week on a break above the current weekly high.

Recommendation: BUY @ [BREAK OF WEEKLY HIGH] FOR A 1.4865 OBJECTIVE, STOP @1.1740.

Contact at jskruger@fxcm.com

The GBPJPY advance from 118.79 (all-time low) to 129.83 was a 5 wave affair.  5 waves move with the larger trend so this is an indication that the larger trend may have turned up, at least temporarily.  I was expecting a larger correction of the rally, but the rally above 129.83 strongly suggests that the next bull leg is underway.  Measured resistance is the 100% extension of the rally from 118.79, which is at 138.21.  Staying above 126.46 keeps the bull trend intact.

Recommendation: Long at market, against 126.4, target 138

Contact at jsaettele@dailyfx.com

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