On Sunday I discussed a level on the GBPJPY that was likely to attract selling pressure. The 150.70 handle served as a pivot for the pair between the 28th of March and the 20th of April.
The sub 150.70 close on April 27 suggested that any retest of the area as new resistance would encounter sellers.
Sure enough, Monday reached the 150.70 area just before hitting a wall of offers and a session high of 150.85. As you can see from the chart below, the next four sessions produced down days, and the GBPJPY is still 300 pips below the 150.70 handle.
Another level I pointed out on Sunday was channel support at 147.00. This past session carved a low of 147.05 before bouncing 60 pips into the close.
So where does this leave us for next week?
Let’s start with what I wrote last Sunday…
In my opinion, the GBPJPY (and other yen pairs) are gearing up for what could be a substantial move south. Whether it occurs next month or six months from now is unclear.
That said, channel support near 147.00 is a vital clue. If the GBPJPY moves to retest this area again over the coming weeks, it would suggest an imminent breakdown.
In my opinion, Friday’s retest of channel support at 147.00 is that clue we’ve been waiting for. That doesn’t mean the GBPJPY will plummet next week. In fact, I’m anticipating some strength early next week as long as 147.00 holds as support.
However, there’s no doubt that the pair is starting to lean on channel support. Look no further than the way buyers failed to challenge the February highs during the latest rally that topped out on April 13.
A lower high? So far the answer is yes.
I remain short from 150.70. Those interested in shorting the GBPJPY may want to wait for a daily close (using a New York close chart) below channel support near the 147.00 handle. It would be difficult to secure a favorable enough risk to reward ratio with an alternate approach.