The GBPJPY closed below a key level yesterday at 142.50. This area first served as resistance in July of last year before flipping to support between December 5th, 2016 and January 5th of this year.
With yesterday’s close, the 142.50 area becomes resistance. As such, any rotation back to the level could offer a selling opportunity.
Upon closer inspection, we can see that 142.50 is very close to the 50% retracement of yesterday’s range. And given that markets like to retrace 50% of an impulsive move, there’s a good chance we’ll see a retest of 142.50 before the next leg down begins.
But as always there are no guarantees. And given how weak the pound has been in the first 24 hours of trade, there’s a chance the GBPJPY could continue lower without us.
If that happens, I’ll stand aside and look to 138.80 for directional cues. It’s never a good idea to chase a market, particularly a yen cross that’s known for being volatile.
As mentioned above, a move lower would likely encounter support at 138.80. This level is the September 2016 high and also acted as a pivot for the pair between November 21st and the 29th of last year.
Thanks to Dave – one of our members – for bringing this trade idea to my attention.
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