GBP/JPY 1H chart 10:05PM EST 1/15/2013
Correction channel, Fibonacci retracement: The 1H GBP/JPY chart shows a market in a correction channel this week, against a market that has been in a sharp bullish trend at least from November 2012. The latest swing is from Jan. 8 low of 139.37 to 144.78. This week, GBP/JPY has made a fibonacci retracement of 61.8%. If the market is to remain bullish, this could be an area for a retracement to find some support.
Bullish divergence, trendline resistance: There could also be a bullish divergence forming. This indicates slowing of momentum, but not necessarily a predictor of reversal. Still, let’s entertain the possibility that after momentum slows, the market climbs back above the 142.00 handle and the 200-hour SMA. Even within the context of further consolidation/correction, there could be a bounce, but it will see first resistance near the 142.40-50 area and another key one closer to 143.00, both at falling trendlines. A break above the second trendline could be a sign of bullish continuation with focus back to at least the 144.78 high.
Trendlines support: If there is further correction, a very possible scenario after a head and shoulders breakdown, the next key area of support is probably around 140.53, 78.6% retracement area. There is also a rising trendline reinforcing this area as possible support. If that line is broken, then we could have a decent reversal at our hands, at least as a significant retracement against the run up since November 2012.
You can see this yourself if you look at the 4H chart and draw some support trendlines. Also note the RSI in the 4H chart around 40, where it should find support if the market is to keep bullish momentum.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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