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GBPJPY Downside Potential Materializes

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Yesterday, GBPJPY confirmed what the pair had suggested during last Thursday’s session. The bearish pin bar off of the 187.30 key resistance level was a red flag that selling pressure was likely to resume after last month’s landslide that ended with the pair down 800 pips.

That weakness resumed during yesterday’s session, pushing the pair back to the 184.20 key support level. This area can be seen acting as support all the way back to 2008.

While some may see this as a buying opportunity, I will be on the opposite end of the spectrum as long as we remain below 187.30 on a daily closing basis. In fact I have a short position that was put on during Monday’s retest of the 187.30 handle.

My bias remains heavily weighted to the downside as I still believe that the price structure that formed between June and August represents a major top for the pair. This has the potential to put an end to the three-year rally, in which case a revisit of 165.60 and possibly lower is not out of the question in the coming months.

That said, nothing moves in a straight line. So while the long-term opportunity is immense for all of the yen crosses, it’s important that we remain patient and time our entries accordingly.

Summary: Watch for a selling opportunity on a daily close below 184.20. Key support comes in at trend line support off of the October 2014 low. A break there exposes 179 and possibly the 2015 lows at 175. Alternatively, a close above 187.30 would negate the bearish bias and expose resistance at 189.50.

Key support levels for GBPJPY

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