GBP/JPY Might Hold 400 Pips Downside Potential in the Upcoming Downtrend

GBP/JPY Might Hold 400 Pips Downside Potential in the Upcoming Downtrend

Published: October 30th, 2020

Weekly chart

GBP/JPY Weekly Technical Analysis 30 Oct 2020

Weekly perspective shows a bearish trend where the price is printing lower lows and lower highs. GBP/JPY remains below 200 and 50 Exponential Moving Averages while recently it rejected the downtrend trendline as well as 50% Fibonacci retracement level at 140.71. Such price action favors the downtrend continuation at least in the medium term.

The key support is located at 131.60-131.70 area, which is almost 400 pips away from the current price. This support is confirmed by two Fibs, 23.6% as well as 78.6% retracement level. The last couple of week’s price has been rejecting the 50 EMA, which next week might reflect negatively on the price, with increased selling pressure.

Daily chart

GBP/JPY Daily Technical Analysis 30 Oct 2020

On the daily chart, the price remained within the descending channel from July until September this year. In September GBP/JPY broke below the channel, although afterward, it corrected up. On the pullback, the pair rejected 50 EMA for two consecutive times and then broke below the channel yet again. Fibonacci retracement indicator was applied to the previous upside move, which shows that 78.6% Fibs almost exactly corresponds to the previously mentioned support area. Also, the downside target corresponds to the downtrend trendline, which suggests that at some point in time it will act as the support.

16-Hour chart

GBP/JPY 16-Hour Technical Analysis 30 Oct 2020

In this timeframe, the Elliot Wave Theory was applied. It could be that GBP/JPY has completed the 5th wave when the price topped out at 142.71 back at the beginning of September. It seems that the correctional phase is ongoing with the B-wave being completed. Perhaps now is the time for the final corrective C-wave down, towards the 131.70 support area. On this chart, this support is also confirmed by 137.2% Fibs applied to the B-wave correction up.

4-Hour chart

GBP/JPY 4-Hour Technical Analysis 30 Oct 2020

Yet another channel was applied, this time it is a descending channel on the 4-hour timeframe. First off, before the channel formation, the 50% Fibonacci resistance at 137.87 has been cleanly rejected in the middle of this month. Then the price went down and broke below the key support area located near 135.73. The lower trendline of the ascending channel has been broken suggesting an increased selling pressure. After the breakout price went up and currently re-testing the supply/demand area which now should be acting as the strong resistance. As long as price stays below the resistance, sellers will definitely dominate on GBP/JPY, and on Monday price is likely to start trending down.

1-Hour chart

GBP/JPY 1-Hour Technical Analysis 30 Oct 2020

Today GBP/JPY has cleanly rejected the simple downtrend trendline along with the key resistance level located at 135.65. This resistance is confirmed by two Fibsn 88.6% and 38.2% retracements. There was spike produce above this resistance, hitting 135.80 high. This might suggest that in the short term 135.80 must be respected for the GBP/JPY to continue the decline.

Two Fibonacci time zone indicators were applied to this chart. They show that the latest cycle has started today, but the thing is that the resistance has been rejected. And if resistance will hold, the price will move down, towards the 131.70 support area, which can be reached on November 10, because this is where ethe new Fibonacci cycle starts.

Summary

GBP/JPY long-term trend remains strongly bearish and today’s price is right at the key resistance level, which so far has been rejected. As long as this resistance at 135.65 will continue to be respected, the price is likely to start a strong downside move, resulting in a 400 pips decline over the course of the next couple of weeks or even less.

Downside targets

As per all the charts, and 5 different Fibonacci retracement levels, the key support is located near 131.70, which should be acting as a strong demand area and potentially a final downside target.

Probability of an uptrend

The first sign of a potential move to the upside would an hourly break and close above 134.80 high, produced today. But only daily break and close above 137.66 resistance will completely invalidate the bearish forecast and GBP/JPY might be reversing up for the long run.

Support: 134.40, 313.70

Resistance: 135.80, 137.66

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