- 4H and 1H: The GBP/JPY pair has been twisting and turning for more than a month now, and has left us some tire tracks to examine. Going back and reviewing market action can provide insight, even though it is in hindsight.
- So how did this begin? Around May 21, the market rallied from the 127.50 area. The market first established resistance near 131.00. We'll call these powerlines. Some refer to these as pivots or reversal points. Notice that after breaking above 131, it was tested several times and held as support.
- Another pivot was established after the market broke above 131. The 133 area became the next pivot, and we are now seeing that as support, tested twice last week as support.
- The market finally established the high in this consolidation zone near 136.40. This also set up a negative reversal, suggesting a swing towards 123. This projection is seen more clearly in the daily chart below.
- Observe the second half of this consolidation, as the market attempted but failed to retest 136.40. During this attempt, some further powerlines were established. 133.80/133.90 is a new pivot, as is the 135.00 level. The high from this attempt is 136, about 40 pips below the previous.
- It appears that a clean break below 133.00 is needed to confirm the bearish outlook towards 123. The 127.50 level would also be a test as it provides support.
- In the near-term, looking at the 1H chart, we can see a triangle setting up. A break below aims at 133 area. A break above aims at the 136.00 area if 135 is broken.
- It is probably best to stalk the pair until it has either broken below 133, or above 136.40.
Fan Yang Currency Analyst Commodity Trading Advisor
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