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GBPJPY Broadening Wedge Could Spell Trouble for Longs

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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.

Want to see how we are trading this setup? Click here to get lifetime access.

gbpjpy-broadening-wedge

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10 comments
Adeniji Mustapha Opeyemi says

“Note that tomorrow’s non-farm payroll will undoubtedly shake things up” i think this kind of fundamental news only affect USD pairs like AudUsd,UsdJpy or am i missing something?

Reply
    Justin Bennett says

    It affects USD based pairs more than others, but the benchmark for both the pound and yen is the US dollar. No currency moves in a vacuum.

    Reply
Imi says

Hi i hope you try to talk about pairs before moving toward levels in advance, till traders be able to get profit , for instance, right now you just say something about GBP/JPY that many traders can predict even those who are not very experienced in Forex Market, and also i should say 147.00 is not the level of reversing may pair rebound for short time but it’s too soon to reverse (as you say) .
You have a site and anticipate about the pair movement not just a trader though you have to be a lot different
Regards,
Imi

Reply
    Justin Bennett says

    Hi Imi, sorry, but I’m not quite sure what you’re trying to say. If my commentary is obvious to you, then you should pat yourself on the back. 🙂

    However, I don’t believe that my commentary is obvious to most. If it were, I’d have no audience which clearly isn’t the case.

    Cheers.

    Reply
Eric Aroh says

Hi Justin,
I have been learning a lot about trading forex from your free site, particularly identifying profitable PA signals and chart patterns.

I have some comments on the GBPJPY pair:

(1) I quite agree that there are some concerns on the 4H widening wedge but I believe that this phenomena is happening on both sides – the LONG and SHORT sides.
(2) The confluence of Support held at 138.50; I believe that the confluence of Resistance should equally hold at 147.00.
(3) The wedge is a rising one, coasting along with the LONGS.
(4) I will not be surprised if the confluence of Resistance is broken at 147.00 for a possible bullish breakout trade.

I will watch Price Action signals at that confluence (Pinbar/Engulfing bars/Inside bars/Dark Cloud/and even Tweezers), in a 30-min chart for possible initial entry (LONG/SHORT), and wait for a second entry when the Reistance Trendline might be tested (on a retracement).

What do you think, Sir?

Thanks

Reply
    Justin Bennett says

    Hi Eric, pleased to hear that. My stance hasn’t changed. I’m not saying the GBPJPY will come crashing down, but the broadening wedge is a sign of possible near-term exhaustion. As always, time will tell.

    Reply
Carol Capner says

Morning Jason.
I love your charts, you manage to keep them clean and as a result the traders mind is free from distraction because focus becomes more powerful.

My view is the GBPJPY is on a short bearish journey but is infact bullish and will be bullish for the next 2 years; as are all the YENS. The YEN’s have almost completed bear crown’s (H&S), Indicating changes in direction.
Lets see what happens.

Reply
    Justin Bennett says

    Pleased to hear that, Carol. For now, I’m just sitting back and watching how things play out.

    PS: It’s Justin, not Jason 😉

    Reply
Karl says

The 147.00 handle is 61.8% retracement of 24 Jun 2016 selloff (Brexit)

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michael walker says

GPYJPY DailyTesting 38.2 fib

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