GBPJPY: Market Structure Favors Sellers

Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

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On September 24th I discussed how the GBPJPY rally was stalling. The risk-sensitive pair had just tested descending channel resistance at 149.50 and carved a bearish engulfing day as a result.

However, the 147.00 support area which I also mentioned in that post never did give way. Instead, it triggered a bounce that took the pair right back to channel resistance.

Fast forward to today, and you can see the pair is in the process of carving yet another bearish engulfing day below the 149.50 area. Much of today’s move is thanks to a strengthening yen, which I mentioned in yesterday’s forecast (see my EURJPY comments).

One thing I want to point out here is that the September 21 bearish engulfing range is still intact. Despite bouncing from 147.00 last month, the pair never took out the September 21 high at 149.71.

The market is also staying below descending channel resistance on a daily closing basis (using a New York close chart). And that 149.30/50 resistance area lines up with the July swing high which developed a sell signal of its own in the form of a bearish pin bar.

Now, this post wouldn’t be complete if I didn’t call your attention back to the May 23rd breakdown. That break of a twelve-month ascending channel tilted the market structure in favor of sellers. That hasn’t changed despite a lot of back and forth movement.

For those in search of a favorable entry, it may be prudent to wait for GBPJPY to clear 147.00/15 support on the daily time frame. Entering before then leaves any shorts susceptible to drawdown given the range-bound price action of late.

The exception to that would be if you managed a short entry above 149.00. In which case, your risk should be minimal.

Below the 147.00/15 support area we have 145.50. You can see how the area served as a pivot starting in late July. A daily close below 145.50 would open the door to the next key support zone at 143.20.

Alternatively, a daily close above 149.50 would negate the bearish outlook.

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