GBP/JPY Likely to Retreat to its 2015-Lows

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GBP/JPY Likely to Retreat to its 2015-Lows

The GBP/JPY has flattened aa rally from February, and has retreated in March. The 4H chart below shows the rally from around 175.50 up to 185 where we saw a rounded top form over several weeks of price action.

GBP/JPY 4H Chart 3/13
gbpjpy 4h chart 3/13
(click to enlarge)

After the rounded top, we saw a bounce off of the 200-period SMA, and price tested the resolve of the price top. Price held below 184 and for the most part held below the 100-, and 50-period SMAs. These technical developments show bears taking over.

Meanwhile, after tagging 30, the RSI reading popped up to 60 and then retreated again back below 30. This shows development of bearish momentum.

With the price top in place, the 175.50 low on the year will be in sight.

GBP/JPY Daily Chart 3/13
gbpjpy daily chart 3/13
(click to enlarge)

The daily chart shows a market that has been bullish in 2014, but has been consolidating since the end of the year. The price action in January and February maintained some bullish bias as it held above the 200-day SMA, and bounced off the 61.8% Fibonacci Retracement of that Oct-Dec rally. However, the bullish continuation outlook is now on hold, as we saw a price top in the 4H chart.

If the market is in a mode of consolidation or bearish consolidation, we might see an ABC correction. In this scenario, where C=A in length, the projection would target the 171 handle.

A less aggressive target would be the 175.50-176 lows on the year.

An even more conservative outlook would at least target the 178 handle, where the 200-day SMA resides. If price does hold above 178, it means GBP/JPy is in more of a sideways consolidation mode than a bearish correction mode.

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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.