GBPJPY tumbles lower, and snaps back higher. What now? | Forexlive

The GBPJPY rotated to the downside yesterday, and in the process moved down toward the rising 100 hour moving average along with a upward sloping trendline (see post from yesterday). The price stalled near those levels into the close. In the early Asian session, the pair broke below the level and consolidated for a few hours before pushing lower with more momentum.

That momentum also took the price of the GBPJPY below the 200 hour moving average (the green line in the chart above). That break was the 1st break below that moving average since April 10. Momentum increased and the price probed toward the a key swing are floor built from lows on April 11, April 12, April 13, and April 14. Those lows all stalled between 165.28 and 165.39 (see red number circles). The low price today reached 165.50 short of that area. The key floor level attracted early buyers against the level.

What wasn’t expected was the snapback rally. Helping the move to the upside was a move back higher in the USDJPY off of the better ISM flash data.

That snapback rally took the price back above the swing area and retracement level near 166.37, and the 200 hour moving average at 166.454 (green line in the chart). The high price moved up to 166.789. That high got within 5 pips of the 100 hour moving average at 166.846 that started the whole rotation lower earlier in the day.

What now?

Yesterday when I wrote about this pair, the 100 hour moving average was a key barometer and traders had a bias defining level as a result. Stay above was more bullish. Move below was more bearish.

Now the level /area carries the same bias defining importance. IN this case, stay below is more bearish. Move above is more bullish.

The price is now approaching resistance not only against the 100 hour moving average but also the swing level near 166.98 and 38.2% retracement at the same level. Risk can be defined and limited against the level with a stop above. As a result I would expect some slowing of the rally. On the downside, the 200 hour moving average and 61.8% retracement of the recent move higher at 1.66373 is interim support (see chart above).

The battle is on in a more defined area after the sharp down and back up trading in this pair.

INAdam’s earlier post, he outlines a bearish case for the USDJPY (and JPY pairs?) as the BOJ ponders the yield curve control levels. The BOJ will meet on Friday.