GBP/JPY Testing 145.00 Support, Short-Term Rally Potential...

Last updated 5/13/2009 2:40 PM EST (GMT -5) 1 Comments

FX360 Technical Analyst Staff

Technical Analyst, GFT

The overnight GBP/JPY sell-off has lead to price consolidation this morning at prices test 50% daily Fibonacci support (144.94) in addition to a bullish 30min AB=CD pattern completion (144.87). More recently, a double-bottom has completed at this level leaving the door for at least a short-term rally to Fib resistance as noted on the 30min chart below (these specific levels are only valid if support at 144.87 holds). Now, if this support fails there's room down to daily 61.8% support and 127.2% channel extension support convergence near 143.54, which is a distinct possibility based on recent bearish momentum after bull trendline violation along with the shallow 38.2% correction after pattern completion.

Generally speaking, failure of an AB=CD pattern suggests continuation to ABCD extension pattern levels, and considering the recent double-bottom confirmation in this particular case, a potentially strong bearish continuation. Since 61.8% daily support sits in the middle of these two levels (see 30min) we may see a dip below the 127.2% ABCD extension (1.4487) then a bounce near 61.8% support. Otherwise, if prices continue to fall past 61.8% support, and move below the 161.8% ABCD extension (142.91), a potentially strong bearish continuation may be in progress.

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  • Daily Chart - Currently testing 50% support, but room down to 61.8%/channel extension support
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  • 30min Chart - Double bottom at AB=CD pattern completion (near 50% daily support)

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Comments (1)

cslos77

May 15, 2009 at 10:28 AM ET

Hello, Roger, I watched this pair over the past couple of days and have seen that it reacted off the 61.8% daily support like you suggested it might. Out of the 3 possibilities you outlined, I was wondering whether you noticed any signs that would have made you confident enough to enter at this point. I noticed the price consolidation over Wed night and into yesterday morning just above this point; would this be enough or would you be looking for other confirming indicators?

thanks again
Jeremy

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