The GBPJPY is now down 550 pips since breaking below rising wedge support on February 7. This was an idea I posted on the 5th and subsequently took advantage of during the BOE-induced spike on February 8.
That entry, by the way, was announced in the member’s area as it played out.
We can even see how buyers retested former wedge support as new resistance during the February 9 session (see second chart below). So there were, in fact, multiple opportunities to get short following the February 7 close at 151.73.
One of the levels I highlighted when the pair was still trading at 152.00 was the 147.00 handle. The level served as support between early October and late November of last year.
Yesterday’s 146.77 close puts the risk-sensitive pair below the key level. We can already see how sellers have come out to defend the 147.00 handle during today’s session.
On a more macro level, Wednesday’s close also puts the GBPJPY below the trend line that extends from the 2016 low.
The February 7 breakdown was no doubt an important moment for the pair. But the daily close below the multi-year trend line shown above carries much broader implications.
Now, another level that I’ve had my eye on for quite some time is 147.90. In fact, in my opinion, the 147.90 area has more going for it than 147.00.
Whether or not prices can get back there before the next leg lower is yet to be seen, but as long as the pair remains below this level, I will stay bearish the GBPJPY.
One consideration from an event risk standpoint is Friday’s speech from the BOE’s Governor Carney at 5 am EST. But perhaps more impactful is the speech from Prime Minister May on issues surrounding the Brexit debate.
The timing of May’s speech is tentative last I checked, but it’s sure to move the needle for the pound.
To summarize, I’m looking for the GBPJPY to remain below 147.90 on a daily closing basis (New York 5 pm EST). As long as that’s the case, I will continue to favor selling strength into new resistance levels. If 147.90 fails to hold as resistance, we’ll see further gains into 148.80 followed by 150.30.
Key support comes in at 145.85 followed by 144.00 and 141.40. If the pair closes back above the 147.00 handle, the area could attract a few buyers during the next leg lower.