GBPJPY bulls may be getting ahead of themselves. Apart from today’s session which is still in progress, the pound cross has had eleven consecutive winning days. That’s quite the feat for a pair that couldn’t make up its mind just one month ago.
However, the good times may be coming to an end for buyers, at least momentarily. Yesterday’s session slammed into the 147.50 resistance level which dates back to early 2013 and was also a factor in December of last year.
The 147.50 area is nothing new for readers of this site. We discussed it on December 1, 2016, shortly after the pair had begun carving out a broadening wedge pattern. In that commentary, the 147.00 area stood out as a zone that could trigger a reversal.
Two weeks later on December 15th, the GBPJPY formed a bearish pin bar from the 147.00 region. At the time the pair was also retesting broadening wedge support, a break that triggered a 900 pip selloff.
So here we go again. The pair is encountering selling pressure right where we’d suspect in that 147.00/50 area.
On top of that, we have yet another rising wedge forming on the intraday charts. But instead of a broadening wedge, we have a narrowing one, yet the bearish implications are the same for both.
So what could push the GBPJPY out of this uptrend?
On Thursday at 7 am EST we have a BOE rate decision along with the accompanying monetary policy summary and inflation report. As always, this combination is likely to influence the future direction of the pound.
For this reason, I won’t be doing anything until the dust settles following tomorrow’s events. But a break from this rising wedge pattern would be an attractive scenario for bears under the right circumstances.
To confirm such a break, we need a 4-hour close below the 147.00 area. The first key support below that comes in at 145.70 followed by 143.70. Alternatively, a daily close above the 147.50/80 area would at least delay a more bearish scenario from playing out.
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