I Expect The Downward GBP/JPY Trend To Continue

The pair formed a trend channel that lasted for almost 18 months (starting from 15^th December 2016 to the breakout to the downside on 23^rd May 2018).

Although the pair has tested the trend line it broke out below it could test the same trend line again and the resistance zone from which we can expect a renewal of the depreciation is at 148.50 – 149.20.

From that zone we could expect a renewal of the bearish trend to the next strong support zone around 136.50 -  135.50.

Below that are the supports at 129.00 – 128.50 and the local low at 128.37, but that is a long term scenario. 

The alternative scenario is for a renewal of the rally from 135.50 – 136.50.

GBP/JPY Broke Out Below The Support Trend Line Of The Pennant

There has been a breakout below the pennant that has been developing for a year and a half and there are even opportunities to open short positions from better levels.

As it often happens after a breakout below or above a trend line of different figures (a pennant, a flag, a wedge, etc.)  the price recovers not only to test the breakout but climbs deeper within the figure, after which it heads toward the limit of said figure, which is the height of the figure from its base to the first level at which the instrument reached the opposite trend line.

As we all know, usually the limit of these instruments is reached indeed. 

In this case said limit is over 2400 pips starting from the breakout level (at  148.123). If the pair reaches the limit it will drop to 124.00 or even lower.

That is, of course, with the caveat that this is a downward trend where one could find countless other entries for positions.

There’s A Perspective For A GBP/JPY Drop

GBP/JPY has been developing within a trend channel for the past eleven months, forming a flag with a height at its base of 2100 pips (135.592 – 156.604).

The pair has reached the support trend line three times (the last time was at 2nd March 2018, Low 144.976) and I think that it will test that support trend line once more in the next few days.

Considering the long term development of that flag, in case the pair does break out below the support trend line I think we could expect a medium and long term drop toward 128.00 and test of the support from October-November 2016 (124.781-126.483).

In the alternate scenario there could be a rally for the pair to gather liquidity in order to break out below the support trend line.

GBP/JPY Is Correcting But Remains Bullish

GBP/JPY is conforming to the general tendency of relative GBP depreciation and for the past week the pair has fallen with 140 pips. The good thing in this case is that the drop was unambigious, considering the two spinning top bars at the high of the move to the upside. Not to mention that as we can see on the W1 time frame, the pair could not break out above resistance zone around 152.50 – 152.70.

In my opinion this depreciation is corrective and the GBP will begin rising again in the medium term.

I expect the GBP will find a support in the zone around 143.50 – 143.30 and renew its medium term rally toward the monthly resistance around 159.00 – 159.30.

In the alternate scenario there will be a drop to the historical low around 126.00 – 126.30 in October – November 2016.

I Expect A GBP/JPY Drop

The pair is already at its lowest levels since 2008.

On the monthly time frame, however, you can see a double top formed by a pair of “falling star” bars with highs at 148.454 and 148.100.

On the weekly time frame one can notice that a trend channel is forming, with width of over 1000 pips, but at the moment it remains incomplete. So far the pair hasn’t reached the support trend line for a fourth time so we could ascertain what type of channel it is.

Despite that we could conclude that after the two “falling star” bars and after a potential breakout below the support trend line the pair could test the local low from 1st October 2016 (124.781) or even some of the previous historical lows that form the support zone around 118.820 -  116.815.

GBP/JPY Is Forming A Wedge

The GBP/JPY pair is forming a wedge on the H4 time frame, its four points are already clearly identifiable.

Most traders are aware of this, but I will clarify again just in case anyone is wondering why the numbers 3 and 4 are placed several times on the screenshot – we can count a point as a consecutive if the price has touched the opposite trend line before that.

In points 3 and 4’s case, the price has not reached the opposite trend line and it has retraced to test the same trend line, which is why we mark these tests again as 3 and 4.

When we have a wedge pattern we can trade the pair both within it or (which is the best case scenario) – to wait out for its development, a breakout above or below its trend lines and then to look for its limit. Make no mistake – there can be a breakout in either direction. Which is why it is necessary to have the patience to wait out said breakout, which in this case has a serious limit: over 300 pips.

GBP/JPY Has Reached a Strong Resistance on the Daily Time Frame and I Think It Will Start Falling

I haven’t examined this pair in detail before. Today, however, there is a pretty strong signal and I think it’s worth paying attention to it.

The pair has reached the strong resistance at 160.50 – 161.50 and has been moving between these levels all day long, forming a very telling doji candlestick on the daily time frame.

The resistance level itself is visualized by the upper band of Bollinger Bands and the green line of the (EMA)89 indicator on the same time frame.

On the 4-hour time frame there is an already closed bearish hammer candlestick which has formed entirely below the resistance at 161.50.

Of course we have to wait for the daily candlestick to close as well, which will happen in a few hours, before we can do anything with any certainty. If the daily candlestick closes as it is now – as a doji below the resistance level – in my opinion this will be a strong signal that a move to the downside is about to begin and the pair could reach at least 157.00.

Is This the End of the USD/JPY Move to the Downside?

When I ask this question I am referring to the global trend that began on 1st Oct 2011 or more precisely, the whole cycle of 5 impulse and three corrective waves.

If we examine the monthly time frame we will see that at the moment the pair has fallen to 38.2% Fibo of the impulse, which makes me wonder whether this is the end of Wave A of the correction. If it has ended, then the possible move to the upside will last at least until the pair reaches 118 – 119. There is another scenario where the move to the downside could continue for a little while longer, until the pair reaches 50% Fibo, which is around 108.50.

Either way, we should expect a new move to the upside, so we should be on the lookout for good entry points for long positions, since Wave B of the correction should start climbing soon.

BoJ Decided Not to Expand Its Monetary Policy and GBP/JPY Fell with 550 Pips

The same thing happened with the other major JPY pairs – USD/JPY and EUR/JPY.

This announcement had a very impressive effect on the market.

However, since I am always very interested in interpreting the signals I see on the charts, I’d like to say that on the GBP/JPY daily time frame the pair had reached a very strong level of resistance at 162.80, which is visualized by the blue line of the Bollinger Bands indicator and the green line of (EMA)89. What is more, below that resistance level there are two doji candlesticks which are an obvious signal that the pair is ready for a reversal.

The same type of signals can be seen on the daily and shorter time frames of the other JPY pair charts.

I am saying this because I have always been convinced that the fundamentals, which are undoubtedly the engine and catalyst of the movement of the different currency pairs, inevitably have their reflection on the charts. That is why it is very important to me to be able to interpret what the market wishes to tell us through them. Thus we always have to strive to become better and better in our ability to read them.

GBP/JPY Might Be Beginning a Correction

The pair has been falling and falling hard for the past nine months.

Despite this you can see a signal on the daily time frame that a correction is about to begin.
 

Since the pair couldn’t stay below the support at 152.00 and despite the fact that it fell to 151.639, in the past two days the GBP/JPY formed an inverted hammer candlestick and a marubozu candlestick on the daily time frame, which are very telling signals that a correction might begin.

 After those two candlesticks there was another attempt to test the support at 152.00, which is also something that happens often at the beginning of a correction. If the pair does start rising the first level of resistance is, in my opinion, around 155.00 – 155.20, which is the upper band of the Bollinger Bands indicator that can be viewed on the 4-hour time frame.

In conclusion I would say that we should follow very closely how the pair behaves at that level.