GBP/JPY Chart 4H 6/28/2012 9:23AM EDT
Risk aversion is giving the JPY strength. The sterling is dragged down by the impasse so far during the EU summit talks. The GBP/JPY has had a bullish June so far, against May’s bearish market. With the rally capped at under 125.80, the GBP/JPY has been developing a head and shoulders pattern see in the 4H chart.
The break below 123.30 area is a completion of the head and shoulders pattern, and also a break of a rising trendline in June. This suggests a reversal against June’s rally.
The RSI in the 4H chart also tagged 30, showing some bearish momentum forming. The moving averages have converged with price action whipping back and forth. If price can now respect the MAs as resistance and stay under, it is another clue for the bearish outlook.
A break below 123.00 opens up the 121.85-122.08 pivot area. Below 122, we open up the June lows around 119.00.
Looking at the 1H chart below, we see that persistent bearish momentum is developing, as the RSI tagged 30, but has failed to break back above 60. It is tagging 30 again. Also, price action shows that a break from recent consolidation low is being confirmed as the pullback is being faded.
Throughout the and at the end of the EU summit, if the market can be held below 124.00, we have a very clear technical setup for the bearish outlook.
GBP/JPY Chart 1H 6/28/2012 9:25AM EDT