Yesterday marked a big day for GBPJPY. After losing 570 pips following the bearish price action that formed on September 17th, the pair now finds itself below a key level that dates back to October of 2014.
We have been talking about this level for several weeks now, noting that a close below it could trigger a larger correction for the pair.
The 4 hour chart shows how the pair respected the level as new resistance after breaking below it.
In the bigger picture, the yen crosses are really beginning to feel the effects of the risk off environment, especially GBPJPY due to recent weakness in the British pound.
Yesterday’s break offers traders the opportunity to watch for bearish price action as long as the pair remains below former trend line support on a daily closing basis. Key support comes in at 178.60 as well as the 2015 low at 175.
However it’s important to keep the bigger picture in mind, which looks fairly bleak considering yesterday’s break along with the idea that 2015 has likely marked a major top for the pair. As such, I wouldn’t be surprised to see GBPJPY trading at 165.60, 156.40 or even 147 over the longer-term.
Do keep in mind that a move of this magnitude would likely take months if not years to fully materialize. In the meantime, the 2015 low at 175 looks reachable in the short-term.
Summary: Watch for selling opportunities while below former trend line support on a daily closing basis. Key support comes in at 178.60 and 175. Alternatively, a daily close back above the trend line would negate the bearish bias in the short-term and open the door for a move back to 182.50.
