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Guest Commentary: Double Correction Taking Shape in GBP/JPY

Guest Commentary: Double Correction Taking Shape in GBP/JPY

Eric Morera, Technical Strategist

GBPJPY has been correcting lower since forming a high at 174.84. The initial decline to 168.28 came in three waves, after which the pair staged a recovery to 173.67, which also occurred in three waves.

New lows were put in below 168.28, but the drop from 173.67 - 167.67 did not occur in five waves, which rules out the idea of a flat (3-3-5) correction and leaves us with a 3-3-3 double correction. This allows for another leg lower towards the 165.50 - 167.07 area.

This is where we expect wave four to complete and the rally to resume. As a result, this would also be a good place to start looking for long positions in other risk assets as this week's trading continues to unfold.

By Eric Morera of

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