Not long after the open this week I became a bit weary of the strong rallies we’ve been seeing in certain pairs. USDJPY and other Yen pairs like GBPJPY have been on impressive runs since the US Presidential election. With the Fed rate hike out of the way, I’m really starting to watch closely for signs that these moves are fizzling out.
And I think we’re seeing some of those potential signs in GBPJPY. Let’s dig in to the charts and see what’s going on.
GBPJPY since the election
Since December 9th, the day Donald Trump won the US Presidential election, GBPJPY has been on a one way trip higher. You can see that in the hourly chart pretty clearly:
But there are a couple interesting things on this chart that are developing right now.
First, notice how the 50-hour SMA has crossed the 100-hour SMA. It’s also just three pips from crossing the 200-hour SMA; you can be sure that it’ll happen. And to me, this is a potential early indicator that the uptrend may be at least on pause.
Coinciding with these developments is the trend line support I’ve drawn. Price has been clustering near this trend line for the last 36 hours, and it’s really starting to feel weak, especially given the action in the SMA’s. The 200-hour SMA has not been broken since the election… not with price nor with another SMA. So this is significant.
The weekly chart may have finally found resistance
It’s still early in the week, so this is one to watch. But look at what’s developing on the weekly chart:
It’s clear that the 50-week SMA is putting up a fight. Can GBPJPY manage to push through this level and continue higher? Or are we going to see price slapped back down. After all, the overall trend is still down. Is it ready to resume?
These are some of the questions floating around in my head right now. If GBPJPY is setting up for a move lower, you can bet that we’d likely see weakness in other Yen crosses, and likely USDJPY itself.
What to do
I’ve already started building a short position in GBPJPY. The 50/100 SMA crossover was enough to get me interested, and as the pair has shown an inability to “get off the mat” so to speak, I’ve grown a bit more confident and added a little more.
That’s not to say that my view won’t completely change by tomorrow. It very well could. And, as a fair warning (or disclaimer), that’s the danger of following someone else’s analysis. Yes, I’m feeling bearish, but I’m prepared to abandon my position if that’s what the market is telling me to do.
If you want to get my trades auto-copied to your account in real-time, check out my forex signal on SignalStart. In the meantime, stay nimble!