Current Status of the GBPJPY

GBPJPY Weekly Chart:

The bullish move from 2005 up to the top of 250 in mid-2007 has been swiftly corrected by an ABC move.
The C wave of the corrective combination has arrived at the 61.8% Fibonacci retracement, where most of the corrections end.
In all the weekly indicators, we have oversold but not extreme situations: RSI at 30, STOC under 20 (actually, this oscillator is of the "extreme" category) and MACD differential near the lowest level.
The current price area around 213 (violet rectangle) is also a support area after being a resistance area.
The chart pattern that jump to mind while looking the chart is a Head and Shoulder one, but we have some trouble in defining the base line here and so, we will not stand on the validity of the thing. Nevertheless, if we do define the base at 230, it seems that the price has fulfilled the desired move: 230-(250- 230) = 210 (Orange rectangle).
There is a big gap between the price and both the medium term (50 Days) and long term (200 Days) moving averages and this gap could give room for the start of a move up.

GBPJPY Daily Chart:

We can see here the sub-divisions of the descent in its Elliott wave details. This 3-3-5 combination is quite common in corrective zigzags.
The big descending channel has many inside parallels that form inside channels and the price is stalling near one.
The great opening in the Bollinger bands requires some kind of normalization in the near future.
The indicators are bearish but with some overtone of reversing: RSI inching back from under 30, STOC also and -DI crossed the ADX in its way down.

Conclusion: We expect a move UP in the pair that will alleviate some of the selling pressure that started at 250. It seems that this move UP could be the resumption of the main trend UP if what we see in the weekly and daily charts as a finished ABC zigzag is actually that. Entering Longs, while crossing the 20 DMA (now at 220) should be the best moves.

GBPJPY Weekly
GBPJPY Daily

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About the Author

Moshe Shalom
Head of Technical Analysis Department
ForexManage Ltd
Site: www.forexmanage.com
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