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- GBP/JPY Technical Strategy: Intermediate-term (past 3 months) bullish; short-term (past month) bearish.
- After an aggressive top-side move post-Election, GBP/JPY has been unable to find lasting support in the retracement of the bullish trend. Potential support levels at 140.00, 138.67 and 135.65 could be interesting for such a thesis.
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In our last article, we looked at the robust up-trend that had developed in GBP/JPY in the post-Election environment in which the pair rallied-higher by more than 2,000 pips from the lows on Election night. But after setting a new high at 148.46, the pair was unable to drive-higher with bullish momentum, and as we wrote in that last piece, looking for the next ‘higher low’ will likely take some patience.
Since that last article, price action has been unable to find solid-enough footing to move back into that bullish trend; and given that this retracement has now moved by more than 800 pips, traders are likely going to want to continue proceeding with caution in GBP/JPY.
The psychological level at 140.00 could be interesting as ‘higher low’ support; but traders are likely going to want some additional confirmation before trading on this thesis given that price action had just set another ‘lower high’ earlier today. If price action can break above this swing-high around 141.50, bullish continuation strategies could become attractive gain.
Conversely, a deeper support test could open the door to short-term bullish reversal strategies in the direction of the longer-term trend. Potential support at 138.67, which is the 38.2% retracement of the most recent major move in GBP/JPY (taking the October 2016 low to the recent swing-high), and again at 135.65 (the 50% retracement of that same move), could open the door to such an approach.
If we see a concerted break below the 135.00 psychological level, the bullish strategy is no longer as attractive for a continuation-thesis; and at that point, the ‘bigger picture’ up-trend will come into question as we’d have retraced more than 50% of the recent bullish move.
Chart prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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