GBP/JPY Technical Analysis: Passing on Long Trade Setup

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Talking Points:

• GBP/JPY Technical Strategy: Flat
• Support: 178.55, 176.31, 174.80
• Resistance: 180.47, 181.86, 182.98

The British Pound may be forming a bottom against the Japanese Yen after producing a bullish Piercing Line candlestick pattern. Near-term resistance is at 180.47, the 23.6% Fibonacci expansion, with a break above that on a daily closing basis exposing the 181.58-86 area (support-turned-resistance, 38.2% level). Alternatively, a drop below rising trend line support at 178.55 clears the way for a challenge of a triple bottom at 176.31.

While entering long is compelling from a purely technical perspective, we will tactically opt to stand aside. The correlation between EURJPY and the S&P 500 is at 0.81 – the highest since September 2013 – pointing to an acute sensitivity to sentiment trends. That means technical positioning may be derailed if the upcoming FOMC policy announcement triggers risk aversion. 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