Technical Sentiment: Neutral
Key Takeaways
• CBI Industrial Order Expectations dropped below expectations;
• GBP/JPY dropped from the resistance of the triangle down to 171.50;
• More losses are expected on a break below 171.50.
U.K. Industrial Order Expectations indicator was forecasted at 7, above March level, yet disappointed by dropping to -1. This led to a quick sell-off among GBP pairs. The damage was limited during the European Session as support levels held sellers in check. GBP/JPY was looking ready for a major break-out outside the triangle formation when price perfectly rejected off the resistance, only to fall down to 171.50, the main price pivot line within the triangle. This remains the key level to watch while the pair remains range bound.
Technical Analysis
The technical bias for GBP/JPY is neutral while price remains stuck inside the long term triangle formation dating back to January, but even so, the 171.50 price pivot line splits this range in two. While above 171.50, GBP/JPY has a slight bullish tendency and remains prone to test the triangle resistance and attempt at a higher swing high beyond 173.56.
171.50 coincides with 38.2% Fibonacci Retracement on last week’s bullish rally. The 50 and 100 Simple Moving Averages, drawn on the 4H chart, add further confluence to the pivot line. A Wednesday close below 172.00 will end up forming a Bearish Engulfing Bar on the Daily chart. Coupled with a break below 171.50, GBP/JPY would open the way towards 170.75 and ultimately 169.50.
While GBP/JPY respects the pivot zone, it would be wise not to get caught holding the wrong position on the wrong side 171.50; unless of course one is trying to catch tops and bottoms off the triangle’s support/resistance.
Resistance levels: 172.77; 173.12; 173.56; 174.82.
Support levels: 171.50; 170.75; 169.49; 167.75.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
