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The GBPJPY has spent the month of March consolidating in a 500 pip range. It comes after the pair fell below 2016 trend line support on February 28.
Just like the USDJPY that I mentioned yesterday, the break below a long-standing trend line on the GBPJPY is a significant development in my opinion.
Like most breaks of a multi-year level, it has been followed by consolidation. The good news for us is that this consolidation has carved a pattern we can use in the coming sessions.
The upper boundary of the pattern is former trend line support that extends from the 2016 low. This is the level that broke down on February 28. As long as the GBPJPY remains below it on a daily closing basis (New York 5 pm EST), I will stay bearish.
The lower boundary is a level that took shape following the March 19 low. It was confirmed as support just hours ago, which means a close below it could open the door to lower levels.
Something I mentioned on March 13 could still materialize here as well. It was the idea that the GBPJPY could overshoot resistance and reach 150.75 before selling off. There’s quite a bit of confluence in the area, making it one to watch.
Because we’re dealing with an ascending resistance level, that 150.75 area is now much closer to today’s price than it was on March 13. Another retest of the resistance level shown below next week could easily reach 150.40 or higher.
If we do see a retest of the 150.40/75 area, I will be on the lookout for bearish price action. Alternatively, I will wait for a close below support that extends from the March low. Key support below that comes in at 145.85 followed by 144.00.
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