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GBP/JPY Technical Analysis:  Setting Up For Something Larger

GBP/JPY Technical Analysis: Setting Up For Something Larger

James Stanley,

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Talking Points:

  • GBP/JPY Technical Strategy: Flat
  • British Pound extends four-day relief rally against the Japanese Yen
  • Standing aside until resistance shows more prominently before triggering short

The British Pound is putting in its fourth consecutive day higher against the Japanese Yen after moving lower by nearly 1500 pips to end the bloody month of August and moving into September.

Near-term resistance is in the 186.50-187.50 area, indicated by the September 9th Daily Candle close and the weekly high/open from the previous week’s price action. Breaks of 187.50 should be construed bullishly up to the 188.10 zone, which is the 50% Fibonacci retracement of the most recent ‘major move’ in GBPJPY. If 188.10 clears, the 189.90 level becomes attractive as it could offer confluent resistance with a 61.8% Fibonacci retracement of the most recent major move, combined with whole number resistance with the 190 figure only 10 pips away. Alternatively, breaks below 186 could highlight rejection at this 38.2% Fibonacci retracement after four consecutive days higher in GBPJPY, and this could make short positions attractive with targets at 185 (whole number support) and then confluent Fibonacci support at 184 (50% retracement from the 2007 high to the 2011 low, and 23.6% of the most recent major move).

An actionable trade setup isn’t yet clear. GBPJPY has put in considerable strength after initiating a new down-trend on the back of Yen strength driven by risk aversion, and the veracity with which this move came in makes the short-side of the pair considerably more attractive given the numerous global pressure points that appear to be close to capitulation. The more attractive risk-reward ratio would currently be in the short direction, but with the recent strength in the pair traders could be advised to wait for resistance to show more prominently before taking the short stance.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.