Last Tuesday we discussed how the GBPJPY was under pressure following a break of key support. The 143.00 area is the intersection of a critical horizontal level and a trend line that extends from the 2016 low.
A look at the bigger picture shows a wedge pattern that has been developing since late last year. I first commented on this structure on August 8th.
Just 72 hours after breaking the 143.00 support level on August 10th, buyers retested the area as new resistance. As you can see in the chart below, the August 15th session carved a bearish rejection candle, suggesting an influx of offers in the area.
Last week closed at a level I mentioned in that August 15th commentary. While 138.60 is the most obvious support level, the 140.50 handle has played a significant role throughout 2017. It’s no coincidence that last Friday’s session closed at 140.52.
I still favor the downside here, but shorting the pair at current levels could put you on the wrong side of the market, at least momentarily. Sellers appear to be a bit overstretched at current levels given that the 10 and 20 EMAs are more than 200 pips above today’s price.
WE RECOMMEND THE VIDEO: S&P 500 Doesn’t Take Tesla Charge, EURUSD Nears Range Boundary as Stimulus Discussed
Subscribe to DailyFX: -Free Trading Guides & Forecasts: ...
Even the most bearish of markets will mean revert at some point. With that in mind, a better approach might be to wait for a move into the area between 141.50 and 142.00 before considering a selling opportunity. Just be sure not to sacrifice a favorable risk to reward if you choose this approach.
Another option would be to wait for a daily close (5 pm EST) below the 140.30/50 support area. Such a break would pave the way for a move toward the June low at 138.60. Either way, a reversion into the 10 and 20 EMAs seems likely following last week’s selloff.
Get FREE Access to Daily Price Action When You Open and Fund an Account With Blueberry Markets!
Want to learn how I trade price action? Watch the Free Webinar
Leave a Comment:
6 comments
Hello Justin
On this post RE the GBPJPY please can you let me know how much relevance if any the fact that the pair is over sold will have to your short analysis?
Thank you
Hi Costa, I titled the post the way I did because sellers have gotten themselves a bit overstretched here. I also mentioned it in the following paragraph.
“I still favor the downside here, but shorting the pair at current levels could put you on the wrong side of the market, at least momentarily. Sellers appear to be a bit overstretched at current levels given that the 10 and 20 EMAs are more than 200 pips above today’s price.”
we are at next resistance. Now if it bounces back to 140.500 maybe we can sell to have a pyramide?
Writing at august 24, too there are not times near comments
I am short from 142.50 and still in green numbers but recent bullish momentum is concerning me up to where this could go. I could already realize a 3R profit at 139.5 but the target was a bit lower at 138.65 I believe that many of you are in a similar situation, therefore would be nice to hear some thoughts. Thanks.
Hello Justin, is this set up still valid? Are you still bearish in this pair? Thanks for your help!
Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Daily Price Action, its employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.
High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results.