Just 24 hours ago I discussed the bearish engulfing range that developed on GBPJPY as a result of Friday’s selloff. It also formed at a confluence of resistance at 149.30 as well as what appears to be a swing high following a 1,000 pip rally.
The only questionable factor was that it formed on Friday. If you’ve followed me for a while now, you know that I don’t often trust Friday signals. The drop in volume before the weekend and end of week profit taking can sometimes produce false signals.
Another thing I mentioned yesterday was how the pair might tag the 50% mark of Friday’s engulfing candle at 148.35 before selling off this week.
Today’s high so far is 148.30 which is just five pips from the price I stated on Sunday. For a yen cross that often travels between 100 and 200 pips per day, I’d say that qualifies as a 50% retracement.
At the time of this writing, GBPJPY is off its session high of 148.30 by approximately 50 pips. It would appear then that sellers were indeed camped out between 148.00 and 148.30.
The volatility is far from over though. Combine the recent flow of Brexit related news which won’t stop anytime soon and the yen’s sensitivity to risk, and you have a pair that is incredibly prone to volatility.
Immediate support for GBPJPY comes in at the 147.00 handle. It’s what ended Friday’s selloff and also what triggered today’s bounce. A study of the late 2017 price action shows why 147.00 is one to keep an eye on.
However, it could also provide an opportunity to add to shorts if sellers can close the pair below it on a daily closing basis. Keep in mind that I use New York close charts, so I’m referring to the 5 pm EST daily close.
Below 147.00 we have 145.50 followed by the 143.20 area. As you might guess, resistance comes in at 148.30 followed by the confluence of resistance in the 149.30 region.
I do want to stress the likelihood of further volatility though. The pound has been volatile enough lately. Throw the risk-sensitive yen into the mix, and you just poured gasoline on a fire, so trade this one with extra care or not at all. As always, this is just my opinion.