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Since the March 2 low, the GBPJPY has churned higher by more than 400 pips. However, two things are keeping me bearish here.
The first is the February 28 close below a trend line that extends from the 2016 low. I’ve discussed this breakdown several times in recent weeks including March 23 and again this past weekend.
The second is the 4-hour rising wedge pattern that began in early March. The upper boundary of the formation is the 2016 trend line I mentioned above.
When I highlighted this pattern on March 23, the GBPJPY was trading at 148.86, and the resistance area at the time came in at 150.40/75. On March 27 the pair reached a session high of 150.50 before immediately dropping 150 pips.
Now, I’m not insinuating that was the selling opportunity. Clearly, this consolidation that began in early March still has more to go.
It does, however, tell us that former trend line support from the 2016 low is still serving as resistance. With that in mind, two scenarios would pique my interest enough to consider a short entry.
The first would be a retest of the 150.75 area. There is enough confluence in the region to suggest that a retest would trigger a move lower and perhaps, a break below wedge support.
Speaking of a break below support, that’s the second scenario that would pique my interest. It’s going to take a 4-hour close below the level which currently resides near 149.00. Such a break would expose the 145.85 horizontal level followed by 144.00.
I told Daily Price Action members last week that this GBPJPY pattern is just about the only thing on my radar right now. Much of the currency market is either consolidating or approaching major inflection points, making entries unfavorable at the moment.
Moreover, if this GBPJPY pattern plays out the way I think it will, it could trigger another 1,000 pip decline over the next four to eight weeks, so it’s well worth the wait.
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