Forex Technical Update

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GBP/JPY 4H Chart 5/7/2012, 6:53AM EDT

GBP/JPY

The Japanese yen continues to strengthen across the board. The GBP/JPY was in a corrective rally in the 5/7 US session, but fell sharply over the 5/8 Asian-European session. As we enter the 5/8 US session, the 4H chart shows a very strong bearish candle falling from near 129.40 down to 128.65. The most near-term support pivot is at 127.80-128.00 area. Below that is the April low at 127.05.

GBP/JPY daily chart

GBP/JPY

Looking at the daily chart from an Elliott Wave perspective, it does appear we have been in a bullish impulse wave from Jan-March 2012. After the (1)(2)(3)(4)(5) wave patter, the market is likely in an (a)(b)(c) wave development and currently in the (c) wave. A (c)=(a) wave equality projection points toward 125.40, near the 50% retracement and a previous pivot around 125.35.

Before this zig zag scenario, there is support at and above the 127.00 handle. If the market fails to break below this, a triangle can form. It is not clear which mode of correction the market will take. Trade management should consider the two scenarios (ie. put trailing stop when market nears 127.00 in case the market consolidates in a triangle instead of a zig zag.

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Fan Yang CMT is the Chief Technical Strategist, trader, educator and a of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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 analysis.