GBP/JPY Faces Biggest Test of Month Long Downtrend
- GBP/JPY near-term slope identified off the lows
- Updatedtargets & invalidation levels
- Short-bias at risk while above 131
Chart Created Using TradingView
Broader Technical Outlook: GBPJPY has been probing the 2011 trendline support for the past few months with the most recent pullback rebounding off basic slope support extending off the July lows. The pair has been in consolidation since the yearly low with the near-term advance now eyeing initial resistance. Note that we’ve also marked some divergence in daily RSI which also suggests that the short-bias is at risk here. The immediate risk is for a move higher while above the low-day close (LDC) with a breach above 135.32 needed to suggest a larger scale reversal is underway.
Notes: The pair has continued to trade within the confines of a descending median-line formation (blue) dating back to the September highs with the exchange rate continuing to respect a newly identified slope off last week’s low. A breach of the objective weekly opening-range high today shifts the focus higher with advance now testing a near-term resistance confluence at the 132-handle. A breach above 132.28 is needed to validate a near-term breakout in the pair with such a scenario eyeing initial targets at 133.22/33. Subsequent topside objectives are seen at 134.23/44 & the key 61.8% retracement at 135.32.
From a trading standpoint, I’d be looking to fade weakness in GBPJPY while above the 2016 low-day close at 130.96 with a break below the lower parallels (red) needed to shift the focus lower (bullish invalidation). A quarter of the daily average true range (ATR) yields profit targets of 52-55pips per scalp. 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
Other Setups in Play:
- USD/JPY Longs Favored Above 101.20- 4Q Breakout in Focus Ahead of NFP
- U.S. Dollar Consolidation - Break in Focus Heading into October Trade
- EUR/JPY Responds to Long-term Slope Support into Close of Q3
- AUD/USD Remains Constructive Above 7570- U.S. Durable Goods on Tap
Looking for trade ideas? Review DailyFX’s 2016 3Q Projections
---Written by Michael Boutros, Currency Strategist with DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.