GBP/JPY Technical Analysis: Bending Support Above the Brexit Low

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Talking Points:

, we looked at the confluent support structure showing in GBP/JPY as a rising trend-channel’s lower-boundary aligned with a batch of north of the 135- in the pair. And while was unable to keep up with the torrid pace of momentum that was showing in that bullish channel, prices have yet to show a definitive down-side break significantly below the 135-handle in the pair.

As we noted last week, the level at 133.20 has been a key area in GBP/JPY as this was the ‘Brexit swing-low’ in the pair; while also coming in as a swing-high and then swing-low two months later when GBP/JPY was marching higher. While price action resides above this level, traders may want to assign a bullish bias to the pair under the premise that a longer-term top-side reversal may be developing after prices were pushed to historically low levels around the panic of the Brexit referendum.

Traders looking to do anything in GBP/JPY would likely want to take note of upcoming headline risk. Tomorrow brings a BOE rate decision and next week has the Bank of Japan; so both represented currencies in the pair could see a pickup in volatility over the next seven days and in a pair like GBP/JPY, this could be significant.

For traders looking to get long, an aggressive entry could be sought should today’s support confirm with the low around the 135-pscychological level. This would be above the prior swing-low at 134.45, and this early indication of higher-lows could potentially prelude a continued top-side move in the pair. For those wanting to tread a bit more conservatively, awaiting a break of swing-high resistance at 136.61 to prove continuation potential could act as an ‘activator’ for the approach, at which point the trader can look to buy a higher-low near the same batch of confluent support in the 135-135.72 region.

For the bearish side of the pair, the 133.20 level could demarcate the ‘line-in-the-sand’ for such approaches; and should price action break below this level, as driven by either BOE or BOJ, this could open the door for bearish stances.

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