A Better Inverse Head & Shoulders in Sterling/Yen

The FX Trader’s view - Back in Feb we looked at GBP/JPY and the growing evidence that a recovery phase was in the pipeline. This is now underway, and there is in place a better Inverse Head and Shoulders base than was first thought to be forming.

• MONTHLY CHART: This cross rate more than halved in value over the last two years. Jan saw a test of a recent Fibo projection around 121.00 (the second leg down from 215.89 high was just over 1.618 of the first leg of 251.09-192.46). Currently the market has come back to retest the significant 148.25 Sep-00 low – immediate resistance.
• WEEKLY CHART: On the Weekly chart we have marked in the usual retracement levels, the first of these, 23.6% 150.00, now nearby. Also see the detail on the Daily chart.
• DAILY CHART: With the break/close above the key 141.53/70 23.6% resistance a bullish Inverse Head and Shoulders was completed. This first targets the 153.75/155.88 area (a Fibo projection and 38.2% level), but also keep in mind the 150.00 level from the Weekly chart and, indeed, that 148.25 Sep-00 low which is today under test. These latter should amount to temporary hurdles only. Ideally support should be at/above the 135.72 30-Mar low, but we can tolerate a test back as far as the 131.46 12-Mar low without having to reconsider the bull view.

Note: GBP/USD, which we covered last week, is still favouring the bulls and we continue to have an initial 1.5070 (a 23.6% level) target here.

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