GBPJPY
The EURJPY cross followed the EURUSD major closely during the summer. More precisely, it consolidated at the highs, well above the 120 level.
But the recent price action shows hesitation. After the ECB meeting and press conference last week, the cross fell from the 126 and now trades well below the 125 level. It seems that it formed a reversal pattern on the 4h timeframe – a triple top with a measured move that points to much lower levels.
Ever since Shinzo Abe announced that he is stepping down from Prime Minister of Japan, the JPY strengthened. The USDJPY trades below the 106 mark, weighing on any attempt from the EURJPY to move higher.
Despite the fact that Suga, the new leader of the ruling party in Japan, vows to continue Abe’s reforms, the market wants to see more. At the end of the week Suga will likely win the job, and he already builds his new cabinet.
The fact that it retained former Abe’s finance minister tells much about the willingness to continue Abenomics – monetary easing, fiscal support, structural reforms.
The uncertainty on the Japanese political landscape and the upcoming U.S. election lead to a possible correction on the EURJPY pair. If anything, profit-taking ahead of the main U.S. event may be in the cards.
The triple top on the 4h chart cannot be ignored. However, bears would want to see the market breaking lower before going on the short side.
As such, the ideal bearish setup needs a close below the blue line seen in the chart below. It acts as horizontal support, and only after a break and close below, bears would halve a signal to short the pair. If that happens, the measured move points to 122, while 125.50 acts as an invalidation level for the bearish scenario.
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