(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; chart patterns in yellow; 200-period simple moving average in light blue.)

3/25/2008 – GBP/JPY – As shown on the accompanying GBP/JPY daily chart, this volatile cross has dropped almost 6000 pips since the last long-term high was hit in July 2007. Since that high, the steady price drop has been marked by continuation patterns in the form of inverted pennants and flags, as represented on the chart by the yellow formation lines. Currently, price has formed yet another inverted pennant pattern, hinting that price may still have more downside momentum. This pattern is outlined on the chart by the dotted yellow lines. Since flags and pennants are often seen as relatively reliable continuation patterns, technical traders are watching for yet another pennant breakdown to follow-through on the pair’s prevailing downtrend. In the event of this breakdown, major downside support resides in the region of the pennant low around 192.50. And then, only if this further support level is breached to the downside will a continuation of the long-term downtrend be confirmed.

James Chen

Chief Technical Analyst

FX Solutions

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