Weekly Trading Signal: GBPJPY

GBPJPY: SELL

Last week, from the low of 140.360, the GBPJPY rose by more than 1150 pips. This happened in less than one trading week, but would it continue? Many traders are now bullish on the GBPJPY (and other JPY pairs) whereas the instruments are now at critical supply levels. The masses’ irrationality here is that, because of the significance of the exponential northward run (in which the price skyrocketed), they are now blindly and recklessly courageous. The rates and policies of the BoJ tend to be formulated in order to combat bad fundamentals. In Forex, when a price goes too far in one direction, one would normally expect it to snap back in the opposite direction, and in the case of the GBPJPY, it can be quick, or slow and steady. The indicators on the chart (the RSI period 14 and CCI period 20), show that the price has gone too far. The CCI is now showing a kind of divergence, reverting lower from the overbought area. The price is currently at significant supply levels, and would not be able to go beyond 153.80. Going lower, it could reach the demand level at 145.80.

Chart: 4 hour

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