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GBPJPY bulls appear to be in trouble.
The pair has struggled all week to break the 135.40 resistance level.
On Thursday, GBPJPY carved what some may have thought to be a bullish pin bar.
But we now know it was more of a hanging man that signaled a last “gasp” from buyers.
The pair also carved a bearish engulfing day on Friday.
Combine these factors, and it appears GBPJPY may be headed back to 132.20 next week.
But the significance of 135.40 shouldn’t be a surprise to anyone who has been following along.
I wrote about 132.20 and 135.40 in the September 8 Weekly Forex Forecast.
Here’s what I wrote:
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Although it wasn’t a huge factor last week, buyers also broke the trend line that extends from the May high.
That’s one more indication that GBPJPY bulls want to take the pair higher.
However, I think the more important factor here is last week’s higher high and whether or not the pair can carve a higher low this week.
Key resistance for the week ahead comes in at 132.20.
Break that and we could see GBPJPY trend higher toward the 135.40 area.
That area, by the way, is very near the 38.2% Fibonacci retracement of the year-to-date range.Quote from Justin Bennett on September 8
As you can see, we were well aware that this GBPJPY relief rally might falter at 135.40.
Given the bearish signals this week, I anticipate sellers will want to defend any retest of the 135.00 area next week.
There’s no guarantee we will get that retest, but that’s now the must-hold level for sellers, in my opinion.
Key support remains the same at 132.20 with a close below that exposing 130.40.
The USDJPY, which I wrote about earlier on Friday, didn’t do GBPJPY bulls any favors either.
The close back inside channel support suggests a move back to 106.80 for USDJPY.
It’s why I told members that I’d be waiting for Friday to close before making a decision.
It may seem irrelevant, but the USDJPY can be a barometer for risk sentiment.
It can also hint at moves from yen crosses like the GBPJPY.
The bearish price action from both pairs (USDJPY and GBPJPY) are complimentary and hint at a stronger Japanese yen next week.