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GBPJPY Testing Key Inflection Zone- Shorts at Risk Above 172.70

GBPJPY Testing Key Inflection Zone- Shorts at Risk Above 172.70

Michael Boutros, Strategist

Talking Points

  • GBPJPY reversal off resistance last week now checking support
  • Broader outlook constructive- support break to trigger correction
  • Event risk on from Japan & UK this week

GBPJPY Daily Chart

GBPJPY Testing Key Inflection Zone- Shorts at Risk Above 172.70

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • GBPJPY holding within confines of ascending channel off the May low
  • Testing key interim support structure 172.61/78- bullish invalidation
  • Break targets support at 171.95 & 171.26
  • Broader outlook constructive above 169.70/93
  • Key Resistance 173.57/75
  • Breach targets resistance objectives at 174.82 & 175.54
  • Daily RSI support trigger pending (close sub-172.60 needed in price)
  • Event Risk Ahead: Japanese CPI tomorrow & final read on UK 1Q GDP on Friday

GBPJPY 30min Chart

GBPJPY Testing Key Inflection Zone- Shorts at Risk Above 172.70

Notes: GBPJPY has come back into a key inflection point we highlighted back in on April 1st when the pair was trading on the underside of this threshold. We are now checking Fibonacci support with channel support dating back to the May low also coming into focus just lower. Although the weekly opening range did break to the downside, the pair has now completed a 100% extension off the highs and if this is to be just a correction within the broader up-trend, this support level should hold.

Bottom line: the broader directional bias remains weighted to the topside while above 170 but a near-term break sub-172.60 could fuel further losses for the pair. Look for a reaction off this level heading into the close of the month with a break/close below risking further losses for the pound. A break back above 173 shifts the near-term bias back to the topside with such a scenario targeting subsequent scalp targets into key resistance at 1.7357/75.Caution is warranted heading into Japanese inflation data and UK GDP later this week as the releases are likely to fuel added volatility in sterling and yen based pairs. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

Entry/Exit Targets

Timeframe

Level

Technical Relevance

Resistance Target 1

30min

173.03

23.6% Retracement / European Range High

Resistance Target 2

30min

173.24

38.2% Retracement

Resistance Target 3

Daily / 30min

173.56

61.8% & 88.6% Retracement(s)

Bearish Invalidation

Daily / 30min

173.75/78

61.8% Ext / 78.6% Retracement

Break Target 1

Daily / 30min

174.00/08

100% Ext / June High

Break Target 2

Daily

174.39

2014 Open

Break Target 3

Daily

174.82

2014 High

Bullish Invalidation

Daily / 30min

172.71/78

100% Ext / March-April-May Close Highs

Break Target 1

Daily / 30min

172.52

6/8 Swing High / Soft Support / ~TL Support

Break Target 2

30min

172.33

38.2% Retracement

Break Target 3

Daily / 30min

171.80/95

50% Retracement / 50DMA

Average True Range

Daily (20)

80

Profit Targets 19-21pips

*ORH: Opening Range High

*ORL: Opening Range Low

Other Setups in Play Heading into NFPs:

---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars this week on Thursday on DailyFX Plus (Exclusive of Live Clients) at 15:30 GMT (11:30ET)

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