Just yesterday we were discussing the potential for the British pound to continue to advance against the greenback. And given yesterday’s close, that still seems likely so long as 1.2410 holds up as new support.
But the pair’s counterpart, the GBPJPY, hasn’t fared nearly as well over the past 24 hours. Yesterday’s plunge in equities has triggered a flight to safety via the Japanese yen. It seems we may have the long awaited answer concerning where the yen pairs are headed.
The last time I mentioned the GBPJPY, it had retested former channel support at 140.70, but buyers were still clinging to 138.90. Since that March 7th commentary, the yen cross has dipped below this level on several occasions.
However, buyers always managed to muster a daily close (5 pm EST) back above the level. As such, there’s been nothing to do here but wait for the imminent breakout.
It’s imminent because to the upside we have a trend line that extends from the December 2016 high at 148.44. And of course, the range bottom is the horizontal level at 138.90 which is once again under fire today.
So as you can see the pair is running out of real estate. But it’s going to take a daily close below 138.90 to open up the downside target at 136.45. This is the current 2017 low as well as the 50% retracement of the 2016 range which extends from 124.77 to 148.44.
Alternatively, a close back above 138.90 and subsequent break of trend line resistance would negate the current bearish outlook. But for now, all eyes are on today’s close and whether it will be above or below the 138.90 handle.
Want to see how we are trading this setup? Click here to get lifetime access.