I do also use conventional technical analysis from time to time, and that's exactly what I've done this time. Well, instead of just one image, you are getting four charts from me today! *clap clap clap*
For the first chart, I've added some general support and resistance levels and a price objective based on the head & shoulders (H&S) pattern which formed the peak. We can see that prices have remain range-bound for a year usually before it moved up to the next level. That is until 2006 where we find prices moving in what looks like a parabolic blow-off. In anycase, using the distance from the peak to the neckline to project from the break of the neckline, we find a price objective at around the 186 level. The second chart shows another interesting tidbit:
The price objective based on the H&S pattern is just below the 61.8% retracement level from the multi-year high and low! How's that for coincidence? Now, let's zoom in on to a smaller time frame to see what the chart can tell us.
Well, now I'm employing alittle Elliott Wave here. I think you'll agree with me that the movement doesn't seem all that impulsive, so I'll use an A-B-C count for now. If however, we are to use a 1-2-3-4-5 impulse wave count, that only means that there's much more downside potential.
Using a A-B-C count, we can see that the 161.8% multiple of wave A is actually rather near the H&S objective and the 61.8% retracement level. I didn't label the purple coloured fibonacci, but its an estimate based on a 1-2-3-4-5 wave count for the previous downmove. Actually, the next (and final) chart will make things a little clearer.
I'm not entirely sure of this count, but, here's what I've got. I counted 5 waves down, followed by an expanded flat. What follows could be
a) In Black : The formation of a triangle, followed by a small upside break before a downmove, or
b) In Purple: Wave B has already been formed, and price continues to move up to form wave C. In this case, Wave C is almost equal to Wave A.
In both cases, prices near the H&S Neckline and wave 4 of the downmove.
So in summary, I think there's further downside to the GBPJPY. Like I said, my fundamentals are horrible, so I can't say what events might support these movements. In anycase, do keep a good risk/reward ratio if you are trading this pair. I'll probably enter near the neckline, or the region of my wave 4 (see the last chart) in anticipation of the move down.
Usual Disclaimer holds. :) Good luck with your trading!
