This weekly currency playbook series starts with a look at the GBPJPY, which saw a lot of movement in the previous week. Retail trading data from IG’s currency sentiment indicates that there is an almost equal bias between long and short traders on the direction of the GBPJPY. Trading sentiment has remained marginally net-long since 19 January, with price gaining more than 6% since then. Indeed, the uptrend in the pair dates back to November 2020 when the price bounced off the neckline of the 16 March/11 May double bottom at the 136.004 psychological support level.
With such a long period of uptrending prices, what could be the potential playbook for the week? Please keep in mind that trading is all about if-when conditions, with a certain set of conditions needing to be fulfilled before trades can be taken.
Technical Outlook for GBPJPY
The weekly chart shows that the pair is in an uptrend. Last week’s dive showed up on this chart as a bearish engulfing candle which enclosed the previous two week’s price action, but which found support around the 150.00 psychological support.
The daily chart shows that the pair remains in an uptrend with higher highs and higher lows. This makes the case for the uptrend to continue, except a lower close invalidates the most recent close. With this in mind, traders with a long bias would need further confirmation for their entries. This could be in the form of a break of the 151.042 resistance (16 March low, 8 April high), accompanied by a pullback and a bounce on this price level. The break and pullback convert this price level into new support.
A bounce here could open the pathway towards the resistance zone that has 152.11 as the floor and 152.367 as the ceiling. Above this level, 153.397 serves as an additional resistance target.
On the other hand, lack of bullish momentum could lead to a penetration close below 150.018, which invalidates the bullish bias and opens the door towards 149.632 (lows of 4-8 March and 9 April), with a further decline targeting the low of 24 March at 148.731. This sequence could also come from a rejection of bullish movement at 151.042, followed by a breakdown of 150.018.