today’s analysis is focused on the GBP/JPY and its perspective for the rest of the 2017 trading year. The GBP/JPY seems to offer an interesting break, pullback, and continuation pattern on the daily chart.
Nenad also completed his analysis yesterday on the GBP/JPY but on the 1 hour chart rather than a daily time frame. FYI his analysis neatly anticipated the 100+ pip bearish breakout and we hope you managed to squeeze some pips from this move.
Check out this article to see a clear top-down approach of the GJ monthly, weekly and daily time frames.
Our first step in our long-term analysis of the GBP/JPY is to analyse the monthly chart and monthly candle (September 2017), which is confirming two important aspects:
Point A: in the GJ image of the monthly chart (see below) you will find more useful information about why price is currently in a bullish momentum.
Point B: the monthly candle broke above the resistance (dotted orange) of the triangle pattern and confirmed a higher high. The difference between September’s high and low is 1167 pips which makes it a decent sized candle.
A key feature of the breakout is the good candle close near the high. The candle close is only 218 pips away from the candle high, which means that the top wick is 18.6% (in comparison with the total candle size). This indicates a pretty good breakout candle.
The weekly chart is showing interesting patterns and market structure. Let’s summarise the most important ones:
All in all, the long-term outlook is bullish. It’s time to review the daily chart and see how far and deep this bearish retracement could go.
The GBP/JPY daily chart is showing a bearish retracement at the moment. This bearish correction is probably part of the larger uptrend, as mentioned above, as long as price:
The current retracement is probably a wave 4 retracement (green box) of this chart or perhaps even a lower time frame. In any case, price is usually choppy and corrective when in a wave 4 and price does not retrace deeply.
Usually turning spots are the 23.6% and 38.2% Fibonacci levels, although a 50% Fib can occur once in awhile. Besides the Fib support, there are also broken tops that could act as potential extra support levels too (blue box).
There are two ways to trade this pullback and potential continuation in my view :
Wish you all good trading,
My twitter: @ChrisSvorcik
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