Over the weekend I mentioned how the 153.80 area would likely serve as resistance for the GBPJPY. Prices bounced around this area last week, but Friday’s final print left me quite bearish.
As you can see from the chart below, the GBPJPY tested the 153.80 area on Monday. The pair then plunged toward the 152.00 handle earlier today which is the support level I mentioned in the weekly forecast.
One reason for my bearishness was the weekly pin bar that sellers left in their wake on Friday. I pointed this out on Sunday, and so far sellers have followed through despite today’s bounce.
Another reason I favor buying the yen is due to what’s happening with other yen crosses. The EURJPY remains below 136.60, which I believe is a significant top and also breached 135.20 support on Friday.
The NZDJPY and CADJPY are two more examples of recent yen strength. Whether or not this theme carries through today’s session and the days and weeks to come is unknown, but so far it’s holding up well.
For the price action trader, today’s movement on the GBPJPY is ideal. Not only did we get a rejection from the 153.80 resistance area worth 180 pips, but we also have further evidence to suggest that wedge support near 152.00 is indeed significant.
Why is that important?
It’s important because it means a daily close below the 152.00 area would likely trigger another round of selling pressure. And despite today’s aggressive bounce, I still believe a break lower is in the cards.
A daily close (New York 5 pm EST) below 152.00/30 would expose the next key support at 149.35. A close below that would pave the way for a move to the 147.00 handle followed by 144.00.
Alternatively, a final print of 153.80 or higher would challenge the potential for a move lower.
You may be thinking, why wait for a close below 152.00 to enter short? Why not commit capital now so you can perhaps scale in later?
If you have the conviction to do so and such an entry satisfies the requirements you’ve laid out for yourself, there’s little need to wait.
Just know that any price action above 152.00/30 is still considered part of a broader five-month consolidation phase which implies an elevated level of uncertainty.
As always, the decision is yours.