GBP/JPY coming to confluence of resistance… Big Drop Incoming !!!!

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GBP/JPY coming to confluence of resistance… Big Drop Incoming !!!!

GBP/JPY coming to confluence of resistance… Big Drop Incoming !!!!

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attached is the weekly chart of the pair GBP/JPY

Rationale:

Technical View:

  1. The pair has been trading in upward territory since March,2020, visible by the bigger rising channel in the picture and coming to channel resistance near 190.700-192 giving the short opportunity for the correction.
  2. Inside the Bigger rising channel most recent price action is also forming smaller rising channel also coming to resistance near 190.700-191.500 giving the more confirmation for shorting opportunity.
  3. The supply area drawn in the picture is visible that the price is coming to touch the supply area again after 8 years , since 2016 & the area is untouched and fresh supply area has more significance than already touched area, giving more confidence in the trade.
  4. The Bat pattern is drawn in the chart ( Red W Line) is also coming the end and looking for the correction to happen.
  5. The most important thing is that The Bigger rising Channel, The Smaller Rising Channel, The Bat Pattern all have the resistance near the supply area , so that makes this trade more significant in shorting with big position size and with more confidence as the resistance confluence is formed there.
  6. The lower panel of the chart shows the RSI Triple Divergence being formed increasing the probability of the successful short trade being formed on the declining volume showed in the lower panel and it says the thrust is losing its momentum and the pair is waiting for it’s longer term pending correction.

 

Fundamental & Macro View :

  1. After Decade of the deflation, Japan is now in the inflationary market visible with it’s PPI & CPI numbers, expecting BOJ (Bank Of Japan) to start controlling the YCC curve and raise the interest rates later in the year.
  2. BOJ meeting is on 23rd January & expecting UEDA to start slowing the pace of bond buying & hinting the path towards raising interest rates also.
  3. Noto earthquake on 1st January might paly the part of recency bias and keep them hold the rates until march but expecting them to raise the rates after that.
  4. BOE (Bank Of England) will consider cutting the interest rates this year by 100bps at least so this will cause the POUND (GBP) to fall against all peers & BOJ to increase the rates , so it’s double whip for the pair (GBP/JPY) this year.

PLAN:

Looking to sell & distribute the pair from 189.700-192 for aggressive traders near supply area for the target of  172-177.

Conservatives can start selling from 191-194 for the target of 172-77

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Thank You,

Sanjay Galani, CMT, CFTe

Investment Director

UMA Network Ltd.