GBPJPY Reversal Odds to Increase Below 147.00

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

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At this time last week, I discussed how the GBPJPY market structure favored sellers. The risk-sensitive pair was holding below descending channel resistance despite several weeks of churning sideways. Sellers had also carved a few bearish signals that had yet to materialize.

There were two things I was (and still am) watching for here.

1. If sellers could continue to defend the 149.30/50 resistance area, and;
2. Whether or not those sellers could clear 147.00 support on a daily closing basis

So far, the market has come through on the first point but not the second, at least not yet. Last Wednesday’s session produced a bearish pin bar and Friday’s price action managed to engulf Thursday’s range.

Even the weekly time frame played its part last week. It was a close call, but last week’s range engulfed the prior week albeit by just a few pips.

As you can tell from my comments above, there have been quite a few bearish signals of late. However, at the same time, GBPJPY bulls have been just as stubborn as sellers particularly when we hone in on the 147.00 support area.

One idea I gave last week was to wait for a daily close (using a New York close chart) below 147.00. It was an alternative to selling the pair at 149.30/50 which, to be fair, has worked out nicely thus far.

Monday’s gap down of nearly 100 pips puts buyers in the hot seat. If they’re unable to close today’s session above 147.00, it could introduce a fresh round of offers and would also expose the next key support at 145.50.

So far, GBPJPY hasn’t managed to close the gap from Friday’s closing price of 147.58. We’ll see if that continues to be the case, but right now it all looks pretty bearish. Even if the pair closes the weekend gap, it seems it’s only a matter of time before 147.00 breaks down.

It’s also important to keep the big picture in mind when evaluating this week’s price action. Remember the ascending channel that broke down on May 23rd? It’s the same level that triggered the July 16 bearish pin bar and subsequent 900 pip drop.

GBPJPY is still below that former support level. As long as that’s the case, the broader outlook here, in my opinion, points lower. Perhaps much lower.

For now, though, it comes down to today’s close in relation to the 147.00 handle. A close below it would open up 145.50 while a close above it would keep the area intact as support.

I sold GBPJPY last week as did many Daily Price Action members. I’ll remain short as long as the pair trades below the September high at 149.70.

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