Dear Trader,
The GBP/JPY has formed a long-term rising wedge pattern, also known as a leading diagonal.
Price is coming to a critical decision point very soon and signs point towards a strong reversal in the medium term.
This analysis will take a closer look at this very interesting currency pair.
The daily chart (above) of the GBP/JPY has been forming a rising wedge since mid 2016. The internal wave structure has a lot of signatures that suggests a leading diagonal makes up Wave 1 of a potential new long-term uptrend.
Generally this chart pattern is followed by a sharp bearish correction, which forms Wave 2 of the new uptrend (as indicated by the black lines).
If this is true, the GBP would soon need to show very strong bearish momentum.
Looking at 4 hour chart, it appears that internal wave b of 5 was an irregular flat. Therefore another impulsive upwards move should occur in final wave c of 5. We are seeing the beginning of this bullish move since the 11th of January. Wave 1 of the impulse should now be complete, therefore another down-up-down-up is likely.
The final swing of a leading diagonal can often break through the resistance trend line of the rising wedge pattern, before price suddenly makes a sharp u-turn and heads downwards.
It is therefore prudent to expect the final bullish push to possibly go as high as 156. Thus waiting for a complete 5 wave structure is important before considering medium-term short entries.
All the best along your trading journey…
Hubert
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