On Sunday I discussed how GBPJPY closed back below a certain key level before the weekend.
That level is descending channel resistance from the year-to-date high.
But before we dig into that, let’s take a look at the broader market structure.
Here’s a view from the weekly time frame:
We have two patterns at work. The first is an ascending channel that broke down in May. We looked at that breakdown several times earlier this year.
The second structure is a descending channel that extends from the year-to-date high. You can see where sellers defended resistance at 148.00 last week.
If we drop to the daily time frame, we can see where GBPJPY came under additional selling pressure during yesterday’s session.
However, so far today, buyers have reversed that trend in volatile fashion.
This latest intraday rally has also closed the weekend gap that developed. Monday’s high came close to reaching Friday’s close at 147.66, but most brokers I checked showed buyers fell short.
So now that the weekend gap is closed and the pair is testing the 148.00 area, is it a good time to sell?
Not in my opinion it isn’t.
The bullishness of today’s move would be a concern for me if I were looking to sell. After all, GBPJPY was just up nearly 300 pips on the day.
I think a better approach would be to wait for today’s session to close. That way you aren’t entering in the midst of this intraday volatility.
It would also allow you to see whether or not that 148.00 area I mentioned on Sunday will act as resistance. We won’t know that until the 5 pm EST close.
If you aren’t using New York close charts, you can go here to get instant access to the same charts I use.
A daily close below the 148.00 area would keep it intact as resistance. A close above it would re-expose the 149.30 horizontal area.
Keep in mind that levels like this descending channel top can also break down over time. In other words, it can lose significance in the eyes of the market.
If a market invalidates a level enough times, I may remove it from my chart entirely.
But right now, I see this as a “wait and see” scenario. We don’t yet have enough information to make a decision one way or the other. Perhaps the daily close will shed some light on things.
When in doubt, wait it out. The saying is a little cheesy, I admit, but it rings true in situations like this.