Since the January 3rd flash crash low, GBPJPY has regained over 1,000 pips.
That’s impressive considering the bearish pressure the pair was under throughout November and December of last year.
Then again, that extreme bearish pressure was no doubt part of the catalyst for this year’s bounce.
If you have followed me since May 2018, you will remember the massive GBPJPY ascending channel that began in 2017.
Here’s a refresher:
I wrote about it several times in the first half of last year.
The pair broke channel support on May 23rd. Following several retests including the July 16th pin bar, sellers eventually regained control.
That bearish pin bar alone was good for 900 pips.
If we turn our attention to the price action since that May low, we can see GBPJPY is carving another channel.
This time it’s a descending pattern.
As you can see from the chart below, GBPJPY is now trading in a zone in and around 145.00 that could attract sellers.
The 50% retracement of the range that spans from the 2018 high to the year-to-date low also comes in at 145.20.
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But it isn’t quite as straightforward as selling at 145.00 and walking away.
At least that isn’t how I would approach this market.
I think it’s going to take bearish price action in the 145.00 region to get the job done. That could be a pin bar or engulfing pattern.
Either way, I don’t want to step in front of buyers at this point.
The 145.00 resistance area will either trigger a reversal like that of last November or become the technical catalyst for a move higher.
Remember that descending channels are more likely to cause a break higher (eventually) than a break lower.
A selloff from here would likely encounter support at 141.15 followed by 135.60.
Alternatively, a daily close above the 145.00 area would expose the 2018 swing highs at 149.30.
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