- GBP/JPY forming a solid price pattern on support
- A breakout (seen as likely lower) appears to be very near
The British Pound has been on the move a bit against the US Dollar, but appears poised to do so soon versus the Japanese Yen. GBP/JPY has been coiling up since the general election spike back on December 13. The price action is forming a descending wedge.
These types of patterns suggest a breakout is nearing as volatility contracts, and with the wedge having a flat bottom and lower-highs, the breakout is poised to be to the downside. There is very solid horizontal support around the 14120/4080-area.
A swift decline below support should have GBP/JPY rolling downhill with a level of support around 13920 up first, followed by the 200-day MA at 13757 and falling. The size and duration of the pattern suggest though a move below 13757 is in the works, with 13551 support seen as another spot of interest as support.
On the flip-side, should GBP/JPY break the upper trend-line of the wedge, a bullish breakout could carry GBP/JPY back towards the high nearing 14800. At this immediate moment, the play is to sit tight until one side or the other confirms a breakout.
Recommended by Paul Robinson
Check out the Q1 Sterling Forecast
GBP/JPY Daily Chart (descending wedge nearing breakout)
***Updates will be provided on the above thoughts and others in the trading/technical outlook webinars held at 1030 GMT on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX