GBP/JPY Price Outlook: Bears Pound Support to Fresh Lows

2018-10-24 20:00:00 Michael Boutros

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GBP/JPY Weekly Price Chart
GBP/JPY Daily Price Chart
GBP/JPY 240min Price Chart
GBP/JPY Trader Sentiment
Relevant GBP/JPY Data Releases
Active Trade Setups

GBP/JPY breakdown accelerates – next big support level 143.64
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The British Pound has plummeted more than 3% from the monthly highs against the Japanese Yen with GBP/JPY probing fresh seven-week lows today. There may be some recovery form levels just lower but the risk remains lower while below the weekly open. Here are the updated targets and invalidation levels that matter on the GBP/JPY charts.

GBP/JPY Weekly Price Chart

Technical Outlook: Last week we discussed the threat of a larger pullback in GBP/JPY after price turned just ahead of confluence resistance with our ‘bottom line’ citing that, “From a trading standpoint, the break of the monthly opening-range does keep the focus lower – but price is at support. IF the break is legit, look for price exhaustion early next week ahead of the monthly open with a break below this confluence support zone needed to fuel the next leg lower in GBP/JPY.”

GBP/JPY Daily Price Chart

Price registered a high at 147.59 on Monday before reversing sharply with the break below the 145.82/97 support zone keeping the bears in control. The decline has already taken out initial targets at 144.81 with more significant support eyed at 143.64/65 where the median-line converges on the 61.8% retracement of both the August rally & April 2017 advance.

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GBP/JPY 240min Price Chart

Notes: A closer look at price action sees GBP/JPY trading within the confines of a descending pitchfork off recent highs. Look for interim support along the median-line / 144.21 with a break / daily close below 143.64 needed to fuel the next leg lower in price. Initial resistance stands back at 145.82/97 with near-term bearish invalidation now lowered to 146.67.

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Bottom line: GBP/JPY broke below a multi-week consolidation range and keeps the focus lower while within this near-term formation. From a trading standpoint, look to reduce short-exposure / lower protective stops on a drop towards 143.64- expecting a larger reaction there for guidance as we look for a late-month low in price.

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GBP/JPY Trader Sentiment

A summary of IG Client Sentiment shows traders are net-short GBP/JPY - the ratio stands at -1.01 (49.7% of traders are long) – neutralreading
Traders have remained net-short since October 2nd; price has moved 2.1% lower since then
The percentage of traders net-long is now its highest since October 12th
Long positions are2.8% higher than yesterday and 30.5% higher from last week
Short positions are 3.3% lower than yesterday and 19.8% lower from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/JPY price trend may soon reverse lower despite the fact traders remain net-short.

See how shifts in GBP/JPY retail positioning are impacting trend- Learn more about sentiment!

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