Forex Technical Update June 29, 2010 GBP/JPY: Bearish Momentum Pop May Imply Weakness
- 1H: Here I define a bearish RSI(14) pop as a it swings from above 60 straight down below 30 without crossing over its own 5-moving average. The bearish signal is based on the fact that the market is able to muster enough momentum against the prevailing trend, implying weakness to come.
- After the market resolves its oversold conditions, the RSI should rise above 30. Then as long as it does not go above 50, a crossover back under its SMA5 is a sell signal.
- Now, we don't have the scenario for a reversal signal, which is what the pop is.
- The GBP/JPY has been trading sideways in the last month, so this pop is not as impressive as it would be under an established rally.
- Given all that, the only thing we can say is that this bearish pop MAY imply weakness.
- We see the market still supported at 133.00. A break below this is a better clue for the bearish outlook, although we may have some early signs of momentum from the current European session.
- I just want to note that in the last update I mentioned the market may rise to 136 if it breaks and closes above 135. Relative to this expectation, the market and a fake-out move, forming a double top before a bearish swing.
- The 4H chart shows that the market may be supported at 133, but already has lost its bullish momentum it had at the beginning of June. A break below 133 should go to 131, with a target to 123, which is suggested by a negative reversal with the RSI in the daily chart.
- Here we see a break below 133, may also bring the RSI below 40, a confluence of bearish signals.
Fan Yang Currency Analyst Commodity Trading Advisor
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