GBP/JPY in Bearish Continuation Mode Tagging the Low on the Year

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GBP/JPY in Bearish Continuation Mode Tagging the Low on the Year

GBP/JPY is in a bearish continuation attempt. The 4H chart shows a recent consolidation and bullish correction that eventually ended with the revival of the prevailing bearish mode.

GBP/JPY 4H Chart 4/13
gbpjpy 4h chart 4/13
(click to enlarge)

The 4H chart shows that there was a bullish breakout in March that stalled at 179.30. After this brief bullish “clear-out” action, strong bearish candles started to appear in the 4H chart. This lead to a break down of the Feb-March consolidation and price made a new low to start this week at 175.27.

There might be some bullish correction in the near-term, but a bearish market should not climb back above 178. There should be resistance around 177, and the RSI should not climb back above 60 if the bearish momentum is here to stay.

GBP/JPY Daily Chart 4/13
gbpjpy daily chart 4/13
(click to enlarge)

The daily chart shows that indeed the market seems to be shifting from a bullish mode at the end of 2014 to a neutral-bearish mode in 2015. Price is under the 200-, 100-, and 50-day SMAs. The RSI tagged 30, but was not able to tag 70.

Now with GBP/JPY trying to make new lows on the year, it is poised to open up the 168 low from Oct. 2014. The bearish candles during the 4/9 and 4/10 sessions were strong and are further evidence of the bearish continuation scenario.

Now, this bearish outlook is strong for the medium-term, but it is in the context of a bullish mode in the long-term as we can see in the weekly chart.

GBP/JPY Weekly Chart 4/13
gbpjpy weekly chart 4/13
(click to enlarge)

The weekly chart shows that price has been bullish since a low of 116.76 om 2012 until the high at the end of 2014 at 189.71. The current decline could simply be an ABC correction to the 170 area, after which we should expect the pressure to return towards the 189.71 high.

It will take a break below 168 to introduce the price top scenario.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.