GBP/JPY Technical Analysis: Head and Shoulders Top Set?

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Talking Points:

• GBP/JPY Technical Strategy: Flat
• Support: 179.58, 177.91, 176.23
• Resistance: 181.46, 183.91, 185.01

The British Pound looks poised to decline against the Japanese Yen after prices completed a bearish Head and Shoulders top chart formation. Near-term support is at 179.58, the 38.2% Fibonacci expansion, with a break below that on a daily closing basis exposing the 50% level at 177.91. Alternatively, a turn above neckline support-turned-resistance at 181.46 clears the way for a challenge of the March 10 high at 183.91.

Tactical considerations argue against taking a short position. Maintaining at least a 1:1 risk/reward ratio with a stop-loss activated on a daily close above 183.91 and a target at 179.58 would require an entry price no lower than 181.75. That requires a move back above neckline resistance, which may itself negate the setup. With that in mind, we will remain flat.

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Daily Chart - Created Using FXCM Marketscope

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