After staggering plunge, GBP-JPY had rather sharp rebound last week. And, frankly, due to the size of these moves, it all looks a little messy. I’m going to use couple of popular technical tools and try to make a little bit of sense out of this.
On 4H charts, the last major, identifiable price swing was the move to the down side from about 182.00 to 138.00. Normally this kind of swings are visible on weekly charts, not 4H, but it is what it is. Last week’s rebound pushed the price to 165 level. When Fibonacci retracement tool is applied, we can see that 61.8% level was reached. This is very typical. Statistically speaking, when the price does not exceed this level, major trend(down) is still intact. It doesn’t mean that the trend will continue, only that it hasn’t been broken yet.
The current minor high of 165 is also important because of couple of other reasons.
Previous low (A) is remarkably close to current high (B). Very often support point act as resistance levels when the trends are trying to revers. It is called “change of polarity’ and happens very often. Another interesting development is proximity of 100 simple moving average, which also acts as a resistance here. Look at points (1) and (2). The 100 SMA behaves a lot like trendline. I don’t use trendlines, because they are ambiguous and largely depend on the perception of the person drawing it. This 100 SMA is drown by computer program and not influenced by opinion of the chartist.
All this indicates that 165 area will be an important resistance level for near future. For now, though, as far as 4H chart is concerned, price is in a “no man’s land” with immediate down pressure. I expect it to drift down to 149.00 level. Lower would be even better. After that we should start seeing an important bottom forming within 165-138 range, with a move above 165 strongly suggesting long term trend reversal. Shouldn’t be any surprise if this takes several weeks. While this is playing out, I’ll be looking to keep buying GBP-JPY breakouts on short term charts. Volatility is still high, so there should be a lot of opportunities for quick trades.
Mike K.
This pair was climbing for some time after open. Started to sell off after Europe opened and is falling fast. Seems like your prediction of 149.00 might work.
The 149 are is a general guieline dictated by technicals. As new swings are forming and additional highs/lows are created, it is subject to revision. At this point it still looks like 149 or so area remains a valid objective, but we have to get under 155 first.
Do you use any technical indicators in your trading?
Not really. Every now and then MACD is used, but outside of that I mainly use price action.
Could you post a longer term trade (maybe using 1H chart) fo GBP-JPY?
I post trades here not as a recommendations, but the ones I take. Currently I focus on short term GBP-JPY trades. There is enough potential there. When the volatility drops, the moves get smaller, I will be more likely to take trades of larger magnitude time frame.
[...] resistance, some of which goes so far back that is not even visible on this chart. These type of polarity change from resistance to support tend to be important. On top of that 0.6200 price level would also coincide with 0.5000 FIB [...]