GBPJPY is back to a well-worn level at 187.25. This level has now acted as resistance on four separate occasions since the pair dropped below it on August 24th.
As if to confirm its intent, yesterday’s price action formed a bearish pin bar on the daily chart.
But this isn’t the first time we’ve seen bearish price action at this key handle either. The pin bar on September 17th worked out beautifully for us, producing a total gain of nearly 600 pips before reaching the twelve-month trend line that extends off of the October 2014 low.
So will the fourth attempt at breaking above 187.25 do the trick for the bulls or will it be a September 17th repeat?
That is anyone’s guess, but if yesterday’s bearish pin bar is any indication, we are likely in for yet another rejection from the key level.
That said, as obvious as yesterday’s setup is, I’m still partial to waiting for a break below the multi-year trend line. Such a break would not only signal a potential change in trend, it would confirm what could be a major topping pattern in the form of a head and shoulders.
The weekly chart tells the story:
Either way, I’m certainly not getting behind the idea of further gains from current levels. Sure, the pair could rally past 187.25, but given the signs that the market has been dishing out over the last four years, a downside break is the more likely scenario in the coming weeks.
Key support from current levels comes in at 184.20 as well as trend line support off of the October 2014 low.