GBP/JPY Technical Analysis: Passing on Short Trade Setup

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Talking Points:

• GBP/JPY Technical Strategy: Flat
• Support: 181.37, 180.25, 179.12
• Resistance: 182.76, 183.62, 184.55

The British Pound turned sharply lower against the Japanese Yen, producing the largest daily decline in over a month. A daily close below the 38.2% Fibonacci retracement at 181.37 exposes the 50% level at 180.25. Alternatively, a turn back above the 23.6% Fib at 182.76 opens the door for a test of the 14.6% retracement at 183.62.

While entering short seems compelling from a purely technical perspective, we will tactically opt to stand aside for now. GBPJPY is closely correlated with the S&P 500, hinting at an acute sensitivity to changes in market-wide risk appetite. That means the upcoming US Employment report may derail bearish technical positioning if the outcome fuels a recovery in sentiment. We will wait for event risk to pass before establishing new exposure.

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Daily Chart - Created Using FXCM Marketscope

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com