GBPJPY Relief Rally Could Stall Below 146.00

Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

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I’ve been bearish GBPJPY since October 8th when the risk-sensitive pair was trading above the 147.00 handle. The breakdown in May combined with the descending channel off the year-to-date high favored sellers while below 149.50.

One week ago I mentioned how the daily close (using a New York close chart) below 145.50 exposed two key supports. The first was 143.90 and the second came in at 142.80.

If you study last week’s price action, you’ll notice that 142.80 did indeed trigger a bounce. In fact, Friday’s low of 142.77 pierced the key support level by a mere three pips before bouncing 70 pips into the close.

Additionally, 143.90 capped the pair’s advances on the 29th and again on the 30th of October. So even though buyers eventually broke through the level yesterday, the 143.90 area has shown that it deserves a place on my chart.

As you can see, GBPJPY has caught a bid following yesterday’s close above 143.90. However, the pair is currently testing an area between 145.50 and 146.00 that could attract selling pressure.

Make no mistake though. As of this writing, there is no clear indication that buyers have exhausted their resources with regard to this latest relief rally, so selling now would be a risky endeavor in my opinion.

That said, I do still favor shorts while GBPJPY is trading within this descending channel that dates back to the February high. And let’s not forget the breakdown of the multi-year ascending channel on the 23rd of May.

So the overall structure continues to point lower, but I need to see more from sellers before I’m ready to open a short position. That could materialize as bearish price action from the 145.50 to 146.00 region or perhaps even a retest of 147.00.

Whatever you do though, don’t discount the possibility of a retest as high as 147.00 before sellers regain control. GBPJPY relief rallies can often take longer than you’d suspect to run their course.

Whether it’s 145.50 to 146.00 that triggers a move lower or 147.00, I stand by my previous comments that GBPJPY will likely revisit the year-to-date low at 140.00 over the next few weeks and months.