Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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On Thursday of last week, I pointed out a key area of resistance on the GBPJPY near 149.00. This was a former support level as illustrated by the ascending channel that extends from the 2017 low.
My first mention of this pattern was on May 4th. So we’re on the same page, here’s a view of the entire thirteen-month channel:
Support broke down during the May 23rd session which was good for 200 pips from open to close. Buyers later forced a retest of the level as new resistance between the 6th and 7th of June, but sellers held their ground.
Fast forward to today, and the pair is right back to test the level as resistance. In fact, the GBPJPY is more than 100 pips higher than it was back in early June when the level came under fire the first time.
Keep in mind, however, that the pair has been quite bullish since coming off the 144.00 handle on June 28th. In the last eleven trading sessions since that time, the GBPJPY has only experienced two down days.
So for now, I’m just waiting to see if we get a reaction from the 149.00/30 area. More specifically, I want to see bearish price action on the daily time frame. Remember, I use New York close charts so that each session closes at 5 pm EST.
Until then, it’s too risky to attempt a short position given the bullish momentum of late.
If we do get a sell signal from 149.00/30, the first key support to keep an eye on comes in at 148.10. A close below that would open the door to the 146.70 area followed by the level that has held on a daily closing basis at 144.00.
Alternatively, a daily close at 5 pm EST back above former channel support would negate the bearish outlook. Of course, buyers would still need to get through the February 2nd trend line in order to push prices higher from there.
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