The GBPJPY has been on a tear since the October low. In just two months time the pair has rocketed 2,000 pips higher. Even more impressive is the seven straight weeks of gains that produced that result.
However, a recent development on the 4-hour chart is cause for concern if you’re a bull.
The broadening wedge that extends from mid-November is a strong hint that buyers may be tiring. While it doesn’t necessarily signal that a complete reversal is forthcoming, it does suggest that a pullback is imminent.
Furthermore, the pair is approaching a confluence of resistance at the 147.00 handle. This area is the intersection of wedge resistance, but more importantly, it was a key pivot in 2013 as well as the 61.8% Fibonacci retracement when measuring from the 2011 low to the 2015 high.
From here traders can watch for a close below wedge support as a sign of extended weakness. Such a break would expose the 138.80 handle followed by 135.40. Alternatively, bearish price action on a retest of the 147.00 area could make for an attractive selling opportunity.
Note that tomorrow’s non-farm payroll will undoubtedly shake things up. But as long as the GBPJPY trades within this ascending broadening wedge I’ll remain on the sideline.
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