Following last week’s break of key support at 143.00, the GBPJPY is in the process of retesting the area as new resistance. Monday’s price action came close to testing the 143.00 region, but even the session high was approximately 100 pips below the mean as measured by the 10 and 20 EMAs.
As you may well know, I use these two moving averages as a mean reversion tool. If the price is too far below them, I won’t sell, and I stay clear of buying a market that is trading too far above them.
So far today is carving a bearish pin bar after testing 143.00 as new resistance. However, even with this favorable price action there are two things to keep in mind.
The first is that we are still hours away from the New York close at 5 pm EST. So even though today’s session is showing rejection from the new resistance area, it’s far from a confirmed sell signal.
The second thing to pay attention to is where the 10 and 20 EMAs are located even after today’s intraday spike above 143.00. Yes, the price is getting closer to the mean, but we could see some additional consolidation here before the next leg lower begins.
Key resistance remains the 143.00 handle on a daily closing basis. A move lower would likely encounter buying pressure at the April swing low of 135.60. Keep in mind that the 140.50 area could also attract a few buyers on the way down.
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