• Daily: The GBP/JPY pair is struggling to rally to the 153.00 resistance level. It may be prudent to let the narrow volatility adjust the short-term outlook. (Refer to Daily Video Technical Update 1.19.2010; 3rd pair).
• Since the stochastic crossed back from overbought, the pair has been in a congestion triangle pattern, though the market is nearing the apex.
• 4H and 1H: The previous post noted the bearish Gartley completed at near the 149.50 area. The pair declined as anticipated in the Asian session.  However, in the European session, the pair bottomed at the 78.6% retracement area at 147.60, and has pared about 78.6% of the Asian-session decline. This completes a bullish reversal signal in the 4H time-frame. However, the stochastic is still bearish but not oversold, so further decline can be expected after a very short correction rally.
• 1H: Now, it is testing a powerline at 148.80 area. One scenario is that the market will break through and test the downsloping resistance at 149.50. This scenario is in-line with the recent bullish mode and would also provide confirmation for further bullish action, albeit very weak.
• However, the decline following the bearish Gartley may not be over yet. The short-term bearish scenario has bearish swings in 1H and 4H time-frame to the 146.80-147.20 area.
• If the market rallies from here, watch to see if the market can establish some resistance around the 147.50 area (the current near-term support). This kind of price action would invalidate our bullish outlook, and suggest a decline to test the 140.50 support area.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. CMS will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

Foreign currency trading is not conducted on an exchange. CMS is acting as a counterparty to its clients’ transactions and as a result, CMS’ interests may be in conflict with its clients. Since CMS acts as the buyer or seller in the transaction one should carefully evaluate any trade recommendation provided by CMS or any of its solicitors. Foreign currency trading involves a substantial risk of loss and may not be suitable for all investors.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.