Price action on GBP/JPY (a daily chart of which is shown) as of Monday (8/30/2010) has pulled back up to the lower border of the large rising wedge formation that it broke down last week before reasserting its bearish stance.
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(Price on first pane, Slow Stochastics on second pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; chart patterns in white; 50-period simple moving average in light blue.)
The low that was reached on the wedge breakdown before pullback was in the 128.75 price region, around a three-month low for the pair.
This occurs within the context of a long-term parallel downtrend channel extending back to the August 2009 high. In the event that price furthers its bearish trend momentum to break below the 128.75 low, a key downside support target resides around the long-term 126.70 low just hit in May.
Any strong breakdown below that level would confirm a downtrend continuation. In terms of key long-term technical support in the event of a breakdown below that level, price would not be too far off from the all-time low at 118.80, hit in January 2009.
By James Chen, chief technical strategist, FXSolutions.com
