For past 9 weeks GBP/JPY had been finding support near the 5-week EMA level with every drop in the price level. The currency pair broke that trend last week after over two months.
Past 3 weeks highs have been as follows:
- Week of January 7th: 144.42
- Week of January 17th: 144.81
- Week of January 21st: 144.24
The resistance is clearly indicating that the psychological resistance of 145.00 is in the picture. With a fall to 139.26, during last week, the fall of GBP JPY broke the trend of past 9 weeks when it dropped below the support of 5-week EMA. The currency pair had recovered strongly to 144.24 but the break of pattern brings in the possibilities of further consolidation.
Overall the economic data from Japan has been weak and on the other hand the recent economic releases go in the favor of GBP. Considering this the only factor which seems to be going against the pair seems to be the fear of 145.00.
Current Price Action:
The current price action is finding support at 22-day EMA as clear from the daily chart above. If this resistance is broken decisively with a break below 141.90 then we may expect another retest of the recent 139.26. Any break below this should bring further consolidation towards 138.20/138.50 support zone.
On the upside, if GPY/JPY manages a break over 143.60 then the above outlook will start neutralizing but a better indication of the same will come only with any break over 144.24. Such a break will break the pattern of the subsequent highs going lower. In case such a move takes place then we will expect a test of 145.00 first and then probably 145.39 i.e. 61.8% retracement of the downward move during the beginning of August 2009 (163.08) to the low of 116.84 on September 22nd, 2011. Any decisive break above that should target the 145.98 which had proved to be a strong resistance during end of April 2010 and is just below the 150.00 psychological level.
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