Talking Points:
- GBP/JPY started June with a bang, but that strength soon faded in the middle of the month as risk aversion started to show across global markets. The pair is now testing a confluent area of support, as both a bullish trend-line along with a 14.4% Fibonacci retracement are helping to hold this week’s lows.
- As we move into Q3, the potential remains for bearish breakouts in GBP/JPY, especially if this is coupled with a continued backdrop of global risk aversion.
- Quarterly Forecasts have just been updated, and Q2 forecasts are now available from the DailyFX Trading Guides Page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Do you want to see how retail traders are currently trading the British Pound (GBP) or the Japanese Yen (JPY)? Check out our IG Client Sentiment Indicator.
GBP/JPY Turns Back to Support
It’s been a sideways type of month for GBP/JPY thus far. After first coming into June with a spate of strength that pushed the pair up to 148.00, buyers soon took a step back, and in the second half of the month a large portion of that bullish move has been erased. To be sure, there have been some flares of risk aversion that have contributed to that bearish move; but at this stage, price remains supported from a trend-line that can be found by connecting the May to June swing-lows.
GBP/JPY Four-Hour Chart: Testing Trend-Line Support From May/June Lows
Chart prepared by James Stanley
When taken with the prior bearish trend-line that showed-up in Q2, this helps to produce a wedge formation, as GBP/JPY has been building both lower-highs and higher-lows. This alludes to the fact that a ‘big’ move may be around the corner as price action further digests into an increasingly narrow range.
GBP/JPY Eight-Hour Chart
Chart prepared by James Stanley
Adding a Fibonacci retracement around that recent bearish move, taking the April high down to the May low, helps to show how the 14.4% Fibonacci retracement is helping to hold up the current lows. This also highlights how a bearish break below this support structure can open the door to a re-test of the May swing-low at 143.20; and if that can’t produce a support bounce similar to what we saw as we came into June, the door can remain open for a deeper bearish breakout in the pair.
GBP/JPY Four-Hour Chart: Trend-Line, 14.4 Fibonacci Support Helping to Hold the Lows
Chart prepared by James Stanley
If we do see a push to fresh 2018 lows beyond the May swing of 143.20, deeper support exists around a series of various levels. At 142.50, we have a major psychological level, and at 141.25 we have a prior group of swing lows from September of last year. Another psychological level exists at 140.00-even, and a bit lower we have the one-year low at 138.68.
GBP/JPY Daily Chart: Deeper Support Potential For Bearish Breakout Strategies
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
