A couple of weeks ago we had a healthy debate about whether this was a bullish or bearish structure in the member’s area. I maintained the stance that the price action since the 2017 low was merely consolidation in the form of an ascending channel.
That consolidation, by the way, began following the massive 7,000 pip decline that started in mid-2015.
I wrote a Q&A post on this very topic which I’ll publish within the next 24 hours. For now, though, I’d like to focus on where I believe the GBPJPY may be headed.
I’ve had my eye on the June and August 2017 lows near 139.50 for quite some time. It’s near the 50% retracement when measuring from the 2016 low to the current 2018 high.
Furthermore, the 139.50 area represents the closing price of the June 24, 2016 Brexit selloff. The following session gapped down, and although it was filled within the next few weeks, gaps like that tend to act as price magnets.
Now, if we take a step back and also draw a descending channel starting from the current 2018 high and connect it to the April swing high and the March swing low, we get a chart like the one below.
I wrote a lesson a while back about how to use channels to identify profit targets. Although the channel below isn’t fully formed just yet, given that support lines up nicely with that 139.50 area, it could be a clue.
It may suggest that the GBPJPY has another 500 or more pips of downside left before buyers come to the rescue. However, don’t take that to mean that there won’t be bounces along the way.
There’s bound to be some turbulence for sellers. Just look at today’s session which was positive by 60 pips at one point and is now down 40 pips.
As for what to watch next week, I’d say that any retest of 147.00 is a chance to scan for selling opportunities. Whether or not such a retest materializes is anyone’s guess, but you certainly don’t want to chase here.
Key support comes in at 144.00 with a minor area near the 145.00 lows. I don’t see much below 144.00 to prevent a move to the final target just below the 140.00 handle.