GBP/JPY Candlesticks and Ichimoku Analysis

04/23/2009 10:52 am EST

Focus: FOREX

The British pound failed to resume its recent rise from 118.87 and traded narrowly last week. Earlier this week, the pound retreated sharply and tested Tenkan-Sen (currently at 141.51), however, a daily close below this level is needed to confirm that the aforesaid up move has ended there, then a fall to 138.00 would follow, then towards 135.20, being 50% Fibonacci retracement of 118.87 to 151.53), however, reckon support at 131.49 would hold from here.

On the upside, above 146.50/60 would bring a rebound to 148.50, however, only a daily close above 149.90/150.00 psychological resistance level would revive our previous bullish view and bring a re-test of 151.53. Looking ahead, if sterling is able to penetrate this level, then a rise to 118.87 shall bring correction of medium-term decline to 153.50, then towards 155.00 and eventually towards our indicated upside target of 158.15, being 50% retracement of the fall from 197.44 to 118.87.

On the daily chart, although the pair traded narrowly for whole of last week, sterling's sharp fall this Monday provided confirmation of early “shooting star” candlestick reversal pattern, indicating a top has indeed been formed at 151.53 earlier this month. The daily close below Kijun-Sen reinforced this near-term bearish view for correction of the recent up move, and a break of 141.51 support would extend further weakness to 140.00, then towards 138.00. However, Ichimoku cloud top (currently locating at 135.48 also just below previous chart support at 135.73) should put a floor on the pair and bring rebound later.

On the upside, although recovery to 145.60/70 is likely, strong rise beyond 146.50/55 (61.8% Fibonacci retracement of 151.53 to 141.51) should hold and bring decline to abovementioned downside targets. In the event sterling rises above said resistance level, then stronger bounce to 148.00 and possibly 149.00 cannot be ruled out, however, only a clear break of 149.90/150.00 would abort this bearish view and put our previous bullish scenario back on the table for re-test of 151.53.

By ActionForex.com Staff

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