On Wednesday of last week, we looked at a potential top forming on the GBPJPY 4-hour chart. More specifically, the rising wedge suggested exhaustion from buyers and hinted at the idea of a bearish reversal.
Less than 24 hours later we had our break of wedge support. As mentioned in the May 10th commentary, the first area of interest was 145.70. As you can see from the chart below, the pair bounced from this area between Friday and Monday, albeit temporarily.
The next support level mentioned in last Wednesday’s commentary was 143.70. This area was reached during yesterday’s rather impressive flight to safety and is holding up so far today.
From here the game plan is pretty straightforward. 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.
If the recent surge in volatility is any indication, and not just in the currency market but others as well, we could be in for a rough summer. And by all accounts, I’d say we’ve only seen the tip of the iceberg.
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