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Bullish GBP/JPY on Correction Lower

Bullish GBP/JPY on Correction Lower

Nick Cawley, Strategist

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** Update **

We entered this trade on Thursday October 5 at 148.10 and remain long despite the move lower to 146.960 on Friday - our stop-loss remains at 146.70. Upside targets of 151.65 and 157.80 remain in place.

Original Piece - September 20.

GBP/JPY has made a quadruple-top over the last week around the 151.50 level and needs an additional impulse to push it higher. Having rallied from 139.35 just under one-month ago, with the uptrend accelerating from Monday September 11, the market is still trying to find a new equilibrium. Looking at the stochastic indicator, the pair are in overbought territory – understandably after the recent surge higher – and the first Fibonacci retracement level kicks in at 148.70, just ahead of the 148.10 May 11 high.

Chart: GBPJPY Daily Timeframe (May 7 - September 20, 2017)

Bullish GBP/JPY on Correction Lower

Chart by IG

And on the weekly chart, the 151.65 double bottom on April 4 and June 6 2016 also come into play, providing another level of resistance. The stochastic indicator also confirms the pair in overbought territory.

Chart: GBPJPY Weekly Timeframe (June 22, 2015 – September 20, 2017)

Bullish GBP/JPY on Correction Lower

Chart by IG

While we remain bullish GBPJPY on a longer term basis, we look for the market to correct back to the 148.10/148.70 level before it retests the current resistance at 151.50/151.65 before pushing ahead to test the June 6 2016 high of 157.85.

Entry Point: 148.10 (May 11, 2017 high)

Target 1: 151.65 (Cluster of April 4 – June 6, 2016 lows/September 2017 quadruple tops)

Target 2: 157.80 (Just below June 6, 2016 high)

Stop-Loss: 146.70 (September 13, 2017 high)

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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