GBP/JPY 1H Chart 7/31/2012 7:55AM EDT
The GBP/JPY is forming a head and shoulders pattern seen in the 1H chart. The price action is similar to that of the GBP/USD as we gear up for the 7/31 US session. It looks like we are breaking the th neckline around 122.43.
Note the RSI broke below 40, reflecting a loss of bullish momentum. Next, if the market crosses the 200-H SMA, we have another sign that the market is no longer bullish.
A swing projection targets 121.70. Note a more conservative target at 121.90-122, 61.8% retracement of the last week’s 120.84-123.77 rally. (The 23.8% retracement marked on the chart at 122.28 is not part of this time-frame and should be ignored).
We see in the 4H chart that the 122.00 handle is also a previous pivot (120.04), so this would be a more conservative bearish target for the head and shoulder’s break.
The 4H chart also shows the market holding under the 200-SMA, which is a sign that it is still bearish. However, momentum has flattened, as the 4H RSI no longer stayed below 60, and was able to push to 70 last week. This means, the bearish momentum is no longer persistent, a reason to be limiting the bearish outlook.
GBP/JPY 4H Chart 7/31/2012 7:56AM EDT
Fan Yang CMT is a trader, educator and a Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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