GBP/JPY Bound to Support Before BoE
Chart Created Using TradingView
Broader Technical Outlook: Last month GBPJPY rebounded off a long-term trendline support dating back to 2011 with the advance breaking back above former channel support. Note that the 61.8% retracement of the post-Brexit rally also converges on this region. The pair is now testing this slope as support to open August trade and if GBPJPY is moving higher, we will want to see this level hold.
Daily RSI has continued to hold 40-support with a topside resistance trigger now in play. A rally higher targets subsequent topside objectives at 140.66 backed by a more significant Fibonacci confluence at 144.48/37. A break below the figure risks a drop back into long-term slope support and we’ll reserve this mark as our broader bullish invalidation level.
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Notes: The pair has continued to trade within the confines of a well-defined descending pitchfork formation extending off the late-July highs with the immediate short-bias at risk while above 133.56-134.19- a range defined by the 61.8% retracement and the 1.618 extension of the decline off last month’s high. Note that the pair has been marking some divergence into these lows and suggests that downside momentum may be waning here.
Interim resistance stands with the median-line / weekly & monthly open at 135.38 with a breach higher targeting 136.10 & the upper parallel. A rally surpassing 137.46 would be needed to validate the reversal with such a scenario eyeing subsequent objectives at 138.56 and the 61.8% retracement at 139.67. From a trading standpoint, i would be looking to fade near-term weakness into this region.
A quarter of the daily average true range (ATR) yields profit targets of 67-70 pips per scalp. Added caution is warranted heading into the Bank of England interest rate decision tomorrow with the release likely to fuel increased volatility in sterling crosses. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Desk and take advantage of the DailyFX New Subscriber Discount.
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Relevant Data Releases
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---Written by Michael Boutros, Currency Strategist with DailyFX
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