GBPJPY Point of importance

Jan 15

GBPJPY: Key Levels and Market Structure Analysis

We are at a critical juncture in GBPJPY, with multiple technical signals and patterns aligning across timeframes. Here’s a detailed breakdown of the current market environment:

Weekly Timeframe
• Channel Break: GBPJPY has dipped below the ascending channel that has been valid since January 2023. While the weekly close has not confirmed a full breakdown, this move suggests underlying weakness.
• Key Indicators:
• RSI: Currently at 45, indicating bearish momentum but not yet oversold.
• MACD: Weak bearish crossover, suggesting declining momentum.
• CMF: Below zero, pointing to capital outflows.
• Support Zones: Should the weakness persist, the next major support could align with the 2020 ascending channel’s lower boundary at 176, a macro target that may take months to materialize.

Daily Timeframe
• Symmetric Triangle: GBPJPY is trading within a well-defined symmetric triangle. The price is currently respecting the triangle’s support line.
• Order Blocks: A minor one-hour order block has been breached, indicating a potential move towards the 190.6–190.8 daily order block, which also aligns with the triangle’s support.
• Indicators: The RSI and MACD suggest caution, but the daily structure remains bullish.

4-Hour Timeframe
• Falling Wedge: A falling wedge pattern has been identified, with a rejection on January 14th. This pattern typically indicates potential for reversal, but confirmation is required.
• Fibonacci Levels:
• The price has retraced to the 0.382 Fibonacci level of the larger downtrend move.
• Deeper retracements to the 0.786 level (188.455) or even the 100% extension would signal significant bearish intent.
• Potential Breakdown: A move below the daily order block at 190.6–190.8 could lead to the next major support levels at 185 and the weekly order block at 181.

1-Hour Timeframe
• Trendline Breaks: A minor trendline with limited touches has been broken and retested, followed by a sharp drop. This shows significant intraday weakness.
• Market Uncertainty: The price is fluctuating near critical levels, and trading in this range is not advisable until the market provides clarity.

Key Observations
1. Risk of Further Downside: Breaking below the daily order block and the symmetric triangle would be a strong bearish signal, aligning with weekly and daily weakness.
2. Upside Potential: A breakout from the 4-hour falling wedge would signal a potential reversal, providing long opportunities.

Plan of Action
1. Avoid Trading in Uncertainty: The current zone is filled with conflicting signals and does not offer a clear edge. Patience is critical.
2. Wait for Confirmation:
• Bullish Scenario: A confirmed breakout above the falling wedge will warrant long positions targeting 192 and beyond.
• Bearish Scenario: A break below the daily order block at 190.6–190.8 could lead to further downside, targeting 188.455 and eventually 185.
3. Stick to the Trend: While the broader trend remains bullish, the current weakness and proximity to critical support levels necessitate caution. Avoid predicting reversals and react to confirmed breakouts.

For many, this trade setup may not be immediately apparent, but GBPJPY is currently at a crucial point that demands patience and precision. At this stage, taking trades without confirmation could lead to unnecessary risks.

We must hone our discipline and wait for the market to provide clear direction before making any moves. Remember, successful trading is not about acting on impulse but about waiting for the right opportunity to align with our strategy.

Stay focused, stay disciplined, and let the market come to you.

Final Note

The market thrives on buyer-seller dynamics. It’s vital to remain objective and avoid fear-mongering or overreacting to individual moves. Let the market decide its direction and align your strategy accordingly. Clarity and discipline will prevail in such volatile times.

Jan 16

Note

GBP/JPY Technical Analysis and Trade Idea: Weekly to Hourly Perspective

1. Weekly Chart Analysis

Key Observations:

Ascending Channel Break:

GBP/JPY has broken below a broad ascending channel’s lower boundary. If the weekly candle closes below this level, it will confirm the bearish breakout.

Moving Averages and Ichimoku:

Price trades below both the 20 EMA and 50 EMA, though a confirmed weekly close under the 50 EMA is awaited.

GBP/JPY has dipped below the weekly Ichimoku cloud, signaling medium-term weakness, though a weekly close below the cloud would strengthen this signal.

Point of Control (POC) and Fibonacci Levels:

The weekly POC is near 190.785, aligning with current price action.

A possible higher-low scenario at the 0.618 retracement is in jeopardy unless price reclaims the channel boundary soon.

Indicators:

RSI: ~43.5, bearish bias (<50) but not extreme.

MACD: Bearish crossover, signaling fading upside momentum.

CMF: -0.14, indicating negative money flow.

DMI: Negative DMI above Positive DMI.

ADX: ~15.5, indicating weak trend strength but potential to strengthen if price continues downward.

Weekly Conclusion:

The long-term bullish structure is under pressure. A weekly close below ~189–190 confirms a bearish breakout and opens the door for deeper corrections toward the mid-180s. Bulls’ last hope is reclaiming the channel boundary (~190.5) before the weekly close.

2. Daily Chart Analysis

Key Observations:

Symmetrical Triangle Break:

Price closed below a symmetrical triangle’s lower boundary, signaling a continuation of bearish momentum.

Daily Order Block (189.8–190.7):

Price is testing the bottom of this demand zone. Failure to hold 189.8 could accelerate selling toward ~186–188.

Indicators:

RSI: ~31, oversold territory, suggesting a potential short-term bounce.

MACD: Strong bearish momentum with consecutive red histogram bars.

CMF: +0.06, indicating lingering positive inflows.

DMI/ADX: Negative DMI > Positive DMI, with ADX ~22.7 and rising, confirming a strengthening bearish trend.

Fibonacci Levels:

Price has breached the 0.786 retracement, often signaling deeper corrections or trend reversals unless a sharp rebound materializes.

Daily Conclusion:

The triangle break and strong bearish momentum suggest further downside. However, oversold RSI (~31) raises the likelihood of a relief bounce, which will likely face selling pressure around 190.7–191.5.

3. 4-Hour Chart Analysis

Key Observations:

Falling Wedge:

A wedge-like pattern is forming within a bearish structure. While falling wedges are typically bullish, the context suggests further downside unless a breakout occurs.

Break and Retest:

GBP/JPY has broken below the weekly channel and daily symmetrical triangle, retested from below, and continued downward.

Indicators:

RSI: ~36, bearish but not extremely oversold.

MACD: Below zero, with waning bearish momentum.

CMF: -0.13, indicating negative flows.

ADX: ~43, confirming a strong short-term downtrend.

4-Hour Conclusion:

The short-term trend remains bearish. While a brief bounce from ~189 is possible, the overall structure favors continued downside unless a wedge breakout occurs.

4. 1-Hour Chart Analysis

Key Observations:

Descending Channel:

Price is moving within a tight downward channel, currently near the top boundary. A rejection here could resume the bearish trend.

Indicators:

RSI: ~39.8, bearish but gradually rising, indicating potential minor intraday pops.

MACD: Slightly green histogram but still below zero.

CMF: +0.02, barely positive.

ADX: ~29, with Negative DMI > Positive DMI, indicating a cooling short-term bearish trend.

1-Hour Conclusion:

Minor bounces may occur, but the immediate bias remains bearish unless price breaks and holds above the 1-hour descending channel.

5. Trade Setup: Short Position

Entry:

Look for a relief bounce into 190.5–191.0 (bottom of the daily order block or underside of the broken symmetrical triangle).

This level aligns with the top of the 1-hour descending channel.

Stop-Loss:

Place the stop above 192.0–192.3, safely beyond the daily OB and triangle boundary.

For a tighter stop, consider 191.5–191.8 but with increased risk of volatility.

Take-Profit (TP):

TP1: ~188.4, aligning with the next significant support zone (~240 pips).

TP2: Trail stops or take partial profits if the pair continues toward mid-186s.

Risk-Reward Example:

Sell at: ~190.8

SL: ~192.0 (120 pips)

TP: ~188.4 (240 pips)

Reward-to-Risk: ~2:1

Alternative Setup: Countertrend Long

Consider a small countertrend long from the 189.8 daily order block bottom.

Tight SL below 189.0, aiming for 191.5 for a 2:1 reward-to-risk ratio.

This setup is higher risk given the dominant bearish signals.

Final Notes:

Confirm the Break or Retest: If price plunges below 189.8 without a bounce, consider chasing a lower entry or waiting for a new retest.

Weekly Close: A weekly close below 190 confirms the bearish case. A snap-back above the channel invalidates this setup.

Risk Management: Position size appropriately to align pip risk with your tolerance. Oversold conditions can cause sharp retracements, so disciplined stops are essential.

Summary:

The bearish case remains compelling following key channel and triangle breaks. A short position off a bounce into 190.5–191.0 offers a clean 2:1 setup, with stops above 192 and targets toward 188. Oversold RSI suggests a potential small bounce, but the dominant trend favors continued selling.