Today’s article will focus on the GBPJPY so grab a cup of coffee and your pen and paper and enjoy the free Forex trading advice. Don’t forget to add us to your Twitter list to get regularly updates on Forex trading ideas, Fx analysis, and currency trading strategies @winnersedgetrad.
When looking at the week chart we can clearly see that the currency has been in an uptrend for quite a while. The currency has moved up a whopping 3,000 pips and just recently made a retracement of 1,000 pips.
The moves are obviously gigantic. But what next? Let’s do some analysis to formulate our currency trading tips.
We are able to make these observations:
1) The move up on GBPJPY was able to break 2 key structure highs;
2) The currency has remained above these broken highs and has now used the same price levels as key support;
So basically, there are now 2 fractals at around the 138-139 price levels which were resistance in the past but have now acted as support.
The next structure top on the week chart is all the way up at 163. A major Fib resistance area is at the 382 Fib at 155.80.
Conclusion: there seems to be decent probability that the currency can retest the next major high if the GBPJPY stays above key support.
On the day chart we can make the following observations;
- We can see a very nice and well built up trend;
- We can see that the GBPJPY was bouncing off the top of the trend channel;
- It has also bounced off the bottom of the trend channel and price is a bit below the middle;
- We can see that the 382 Fibonacci level was respected and used as support.
A 382 Fibonacci retracement is quite a common retracement level when a strong trend unfolds. Why? The power of the trend is so massive that buyers enter at a higher price. The Yen trend usually would qualify as a powerful trend, so the 382 could definitely be the turning point for more upside.
Other key factors to note are:
a) that the currency has broken the down single trend line and is staying above a key single trend line, which could act as support;
b) that the currency could be making a head and shoulders pattern.
The head and shoulders pattern might be a danger for the bulls. In that context the recent high at 145,80 is a key level.
- If the level remains respected and not broken, then we will need to keep an eye whether the trend channel and major support get broken. The next downside target could very well be the bigger 500 or 618 Fibonacci retracement level. The 618 is also a huge broken top which could act as support.
- If the level does get broken, then a continuation of the trend seems more likely. The target is the -0.272 Fib target of the 382 retracement at 154.
Potential Forex trade setups are at the following spots:
- Upside at the green support line;
- Upside at the bottom of the black up trend channel;
- Downside under the major support levels down to 500 and 618 Fib.
4 hour chart
One word of caution, the 4 hour chart we are able to see the first marks of bearish sentiment on the chart:
- The currency respected the 786 Fib of the down move to the pip;
- The GBPJPY made an impulsive move down;
- The move up is corrective of nature and looks like a rising wedge.
I am keeping a close eye on how the currency will respond once and if it does come closer to the major support levels. It will be crucial to see if we get a bounce or break.
What is your view on the GBPJPY? Are you looking to short or go long?
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