Daily Price Action

GBPJPY Has Potential but Timing Is Key


Exactly one week ago we discussed the GBPJPY and what we might do based on various outcomes of the range that had materialized between 143.70 and 145.70. Well, here we are five trading days later, and the pair is trading just 30 pips higher than it was at the time of last week’s post.

There’s been a relative silence to the yen that leaves me on edge. Sure, pairs like the AUDJPY and NZDJPY have managed to churn higher following the May 17th landslide, but all in all the safe haven yen has been pretty docile since last week’s surge in volatility.

However, quiet times like this are often followed by an increase in volatility. And the longer a pair like GBPJPY moves sideways and consolidates, the more volatile the ensuing breakout tends to be.

The big question is, which way will it break?

While the answer remains elusive for now, recent price action suggests a move lower is imminent. I don’t usually speak (or write) with such certainty, but the fact that buyers have failed to test 145.70 resistance after five trading days speaks to some underlying weakness in the pair.

Don’t get me wrong. It’s still important to wait for a close below 143.70 before considering an entry. Otherwise, you’ll likely get “whipsawed” in the choppy price action of late. But a break lower does seem like the most likely move at the moment.

So just to reiterate from last week…

A 4-hour close below 143.70 would expose the next key level at 141.85. While it may not appear to be very influential of late, the 141.85 area was a critical factor between 2010 and 2013. It’s also the 50% retracement of the current 2017 range from 135.58 to 148.10.

Alternatively, a retest of the 145.70 area could also produce a selling opportunity. From there support would come in at 143.70 followed by 141.85. Of course, a close back above 145.70 would be a sign of strength that could at least delay the advance of this week’s decline.

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GBPJPY 4-hour chart

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1 comment
Mimi says

Great analysis as always and the pair broke the level you mentioned and went straight down from there. You are really a super trader and “mentor”, Justin!

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