Over the weekend I discussed how I was looking for a retest of 149.40 on the GBPJPY. Friday’s intraday move above 147.90 seemed to indicate that the pair had more steam to blow off before the next leg lower could commence.
As I write this, the GBPJPY is trading at 149.20. The fact that the pair reached former trend line support as new resistance quicker than anticipated means that our key resistance area is closer to 149.20/30 rather than 149.40.
However, instead of searching for a short entry today, I’m going to hold off until Wednesday’s session. Something tells me that we could see the pair overshoot this new trend line resistance by a considerable margin.
In fact, I wouldn’t be surprised to see the GBPJPY spike to 150.75 before any credible selling pressure emerges. This is the 50% retracement from the February 2 high to the March 2 low and a level that served as a pivot throughout March.
Despite recent strength, I will remain bearish the GBPJPY as long as the pair remains below 149.40 on a daily closing basis (New York 5 pm EST). Key support comes in at 147.90 followed by 145.85 and 144.00.
In summary, I need to see former trend line support hold as new resistance. If it holds today and we get an intraday surge to 150.75 tomorrow, I will consider a small short entry from that level. But a daily close back below 149.40 will be required to hold the position.