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

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.