The GBPJPY has continued its descent this week following the February 7 break below trend line support. I mentioned this possibility just 48 hours before the pair broke below the 152.50 area.
I entered short at 153.45 and remain in that position at the time of this writing. I also commented on the entry in the member’s area as it was happening.
Now, Wednesday’s session produced a long-tailed bullish candle from 149.35. This is a level I pointed out in the February 5 commentary.
However, I opted to stay in my short position in the face of Wednesday’s bullish candle because of what the USDJPY was doing the very same day. As a benchmark for the yen, the USDJPY close below the 2012 trend line, and the 2017 low at 107.30 was a significant development.
That break of key support in the USDJPY signaled to me that the yen crosses would struggle to make gains despite their bullish patterns.
It worked out quite well considering the USDJPY has yet to produce a winning day this week. Furthermore, pairs like the EURJPY, GBPJPY, and AUDJPY are on course to retest Wednesday’s low.
So what’s the idea for next week?
If the GBPJPY is respecting 149.35 on a daily closing basis (New York 5 pm EST), which appears to be the case, a close below it today would expose downside targets.
Those targets include the 147.00 handle followed by 144.00. But first, we need to see a close below 149.35 followed by selling pressure from this area next week.
If the pair closes above 149.35 today, we could see a push higher next week toward 151.20 resistance.
All that said, if you’re looking to buy the Japanese yen, I believe the EURJPY (as discussed yesterday) to be a better option. Its technicals are a bit cleaner than that of the GBPJPY which means entries should be easier to identify.
Moreover, the Euro is struggling against its pound counterpart today. We had a good idea that this would happen given the EURGBP’s test of range resistance on Wednesday. See Monday’s post for more.