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GBP/JPY Technical Analysis: Up-Trend Looking Attractive
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Talking Points:
GBP/JPY Technical Strategy: Flat
GBP/JPY has set a higher-low and a higher-high, opening the door for potential long positions early next week.
Previous Fibonacci resistance is now becoming new support.
In our previous piece, we investigated a new higher-low that had invalidated a previously pending short-setup. This new higher-low gave the initial impressions of a potential up-trend, and price action on Thursday moved higher and established a new intermediate-term high at 188.25, opening the door for potential long positions early next week.
GBP/JPY has spent most of Friday in the red after the FOMC-fueled rip saw the pair move higher. But today’s price action wasn’t necessarily bearish, as it looks as though GBP/JPY is attempting to carve out another higher low off of the 186.27 support level. This is a very relevant price that was a key part of the previous short-side thesis, and now we have an example of old resistance becoming new support in a burgeoning up-trend. 186.27 is the 38.2% Fibonacci retracement of the most recent major move, taking the high from June to the panic lows of September (shown in black on the below chart).
For the long side of the trade, targets could be sought at 187.50 (previous swing-high resistance and a ‘major psychological level’), 188.10 (50% retracement of the most recent ‘major move’), and then 189.93 (61.8% retracement of that same move.
Alternatively, short positions could become attractive should prices fall below 185.50. Breaks below this psychological support level could open the door for targets at 185 (psychological level), 184 (confluent Fibonacci support with 23.6% of the most recent move as well as 23.6% of the ‘big picture’ move taking the 2007 highs to the 2011 lows).
Written by James Stanley of DailyFX; you can join his distribution list with this link, and you can converse with him over Twitter @JStanleyFX.
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