GBP/JPY Technical Analysis: Bending Support Above the Brexit Low
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- GBP/JPY Technical Strategy: Prior bullish move continuing to congest; near-term choppiness.
- With Central Bank meetings on the docket from both the U.K. and Japan in the coming week, this pair will likely see heightened volatility.
- If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.
In our last article, we looked at the confluent support structure showing in GBP/JPY as a rising trend-channel’s lower-boundary aligned with a batch of Fibonacci levels north of the 135-psychological figure in the pair. And while price action was unable to keep up with the torrid pace of momentum that was showing in that bullish channel, prices have yet to show a definitive down-side break significantly below the 135-handle in the pair.
As we noted last week, the level at 133.20 has been a key area in GBP/JPY as this was the ‘Brexit swing-low’ in the pair; while also coming in as a swing-high and then swing-low two months later when GBP/JPY was marching higher. While price action resides above this level, traders may want to assign a bullish bias to the pair under the premise that a longer-term top-side reversal may be developing after prices were pushed to historically low levels around the panic of the Brexit referendum.
Traders looking to do anything in GBP/JPY would likely want to take note of upcoming headline risk. Tomorrow brings a BOE rate decision and next week has the Bank of Japan; so both represented currencies in the pair could see a pickup in volatility over the next seven days and in a pair like GBP/JPY, this could be significant.
For traders looking to get long, an aggressive entry could be sought should today’s support confirm with the low around the 135-pscychological level. This would be above the prior swing-low at 134.45, and this early indication of higher-lows could potentially prelude a continued top-side move in the pair. For those wanting to tread a bit more conservatively, awaiting a break of swing-high resistance at 136.61 to prove continuation potential could act as an ‘activator’ for the approach, at which point the trader can look to buy a higher-low near the same batch of confluent support in the 135-135.72 region.
For the bearish side of the pair, the 133.20 level could demarcate the ‘line-in-the-sand’ for such approaches; and should price action break below this level, as driven by either BOE or BOJ, this could open the door for bearish stances.
Created with Marketscope/Trading Station II; prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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