Forex Technical Update July 2, 2010 GBP/JPY: A Pullback after Double Top; Price Action Volatile but Within Daily Range
- Daily: The GBP/JPY completed a double top ahead of today's NFP release at 8:30AM ET. This double top suggests a decline, but it can also be a flat correction to be followed by continuation.
- Normally, I would be looking at the pullback to see if it can be rejected. A pullback rejected from going above 61.8% for example is a good sign.
- Here, during the NFP release, the GBP/JPY pair was very volatile. It shot up, but was not able to extend today's high. Then, it fell all the way near the session low.
- This is seen in many JPY crosses. The euro is only major that clearly rallied after the release.
- All this event risk, and the twist and turning blurrs the outlook, so a look at the weekly might help keep us in perspective.
- Weekly: The GBP/JPY is bearish overall since summer of 2009. However recent weeks have found a bottom near the 127 level. The market rallied almost to the 136 (50% retracement) level.
- The RSI broke 40, but is showing bullish divergence.
- Price action shows last couple weeks of relatively narrow and flat price action after a few weeks of bullish attempt.
- If this week's candle can close below last week's low, it is a good sign for the market to continue lower.
- If the market can break through 134, which was apparently loaded with bearish(shorting) interest today, then the pair can rally towards 138.60/139.00 area (61.8% retracement) and channel resistance.
Fan Yang Currency Analyst Commodity Trading Advisor
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