Sharp fall sees a rebound. Battle lines are drawn in the GBPJPY pair.
The GBPJPY is a volatile pair and it showed it in the trading today.
The pair tumbled lower on the prorouge headline news. The price fell all the way to the 50% retracement at 128.61 and then a lower trend line as well (see chart below).
However, there was a bounce back rally. The pair has settled at a higher level with support and resistance battle lines developed in the process.
Looking at the hourly chart above, the 128.979 area (call it 129.00 area) was swing low support levels on August 26 and August 27 (Friday and Monday). Today’s move lower raced through that level but the last 5 hours has seen the price close above that level. I see that level as one that needs to be broken and stay broken to keep the sellers more in control going forward.
On the topside, the price did correct up to the 200 hour MA on the snap back correction on the intial run lower. Sellers leaned against that level. If the pair is to go higher, breaking back above that level will be needed. The level comes in at 129.454. Above that the 100 hour MA would be in play at 129.727.
So the range is much bigger for the day, but you can shorten up the support and resistance to 128.979 (129.00) below. There should be intraday traders who will lean against the area, with stops on momentum below. On the topside, the 129.454 level (200 hour MA) should attract patient sellers. Those shorts/sellers should also look to stop their trade on a momentum break above that MA level (with more upside momentum on a break of the 100 hour MA).
Volatility yes…but the range has been shortened up and the buyers and sellers have their levels to eye.