GBP/JPY: Q3 Bullish Breakout Takes a Step Back
- GBP/JPY sold-off each day of the week Monday-Thursday, and is currently trying to dig-out support around the 50% marker of the May-July bullish move.
- Yen weakness started to show potential as a workable theme earlier in the quarter, even offsetting the GBP-weakness that was showing in other pairs on the basis of Brexit dynamics. Will bears in the British Pound finally be able to eclipse sellers in the Japanese Yen to push prices back-below 145.00 in GBP/JPY? We look at both bullish and bearish scenarios below.
- Quarterly Forecasts have just been updated, and the Q3 forecast for GBP is 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.
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GBP/JPY Reverses After Earlier-Quarter Breakout
It’s been a big start to the second half of the year for the Japanese Yen. After opening into Q3, Yen weakness showed against a number of currencies, the British Pound included - and this helped GBP/JPY to make another approach at the 150.00 level. But, just as we saw in early-June, resistance came-in on the underside of the 2017 bullish trend-line, and prices promptly reversed. GBP/JPY has dropped every day of this week Monday thru Thursday, bringing to question the possibility of continued upside in the pair.
GBP/JPY Daily Price Chart
Chart prepared by James Stanley
This week’s pullback in GBP/JPY price action wiped out as much as 50% of the bullish move that started in late-May. The 50% marker of that move started to get tested yesterday, and after a quick breech below earlier this morning, buyers have pushed prices back-above the 146.26 area on the chart.
GBP/JPY Eight-Hour Price Chart
Chart prepared by James Stanley
The Bullish Approach
At this stage, we may be looking at the potential for bullish continuation given a hold around 50% retracement of the recent bullish trend. While the British Pound continues to carry risk from ongoing Brexit negotiations, weakness in the Japanese Yen was able to outpace that concern earlier in the month, and this may be a theme that can continue in the near-term. Bullish approaches can look at stops below either the 61.8% Fibonacci retracement of the May-July move around 145.50; or alternatively below the 145.00 psychological level. On the target side of the bullish approach, traders can look at profit targets around 147.87, which is the 23.6% retracement of that same move, followed by 148.50, 149.32 and then the 150.00 psychological level.
The Bearish Approach
This week’s sell-off was brisk and consistent, and for those looking to implement a bearish bias on the pair, that backdrop can be workable as well. Traders would likely want to let prices firm for a bit considering the amount of short-term support that we’ve seen build from 146.00; but if we can make it back to the area around 147.00, the door could be opened for a lower-high to show up and that could allow for stops above 147.67. Traders can then look for targets at 146.26, followed by 145.54 and then 145.00.
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.