This weeks GBP/JPY Analysis & Predictions

I am going to address the Monthly Chart first this week. Technically the month will not end until 00 GMT (8 PM EST), in a little under 3 hours, but this chart should stand as it is. There are two things I would like to point out. First of all is the bullish Tom DeMark trend line. (I won't take time and space to define a Tom DeMark trendline. Google it for more detailed info). This line is still a technically valid monthly line because it hasn't had a monthly close beneath it yet, even though it was heavily breached in August. Second, notice that this trend line matches up almost perfectly with the TFT around 229.70. Watch closely to see whether or not momentum shifts as soon as the month is officially over. Based upon this chart alone I see bullishness continuing until that trend line has a candle close beneath it.

M2B

I'm going to post two different Weekly Charts. The first one is a broader shot to show what is known as 'Inverted Divergence' on MACD to price. The two black lines show the divergence in this case: price is moving up while MACD is moving down. The divergence in this situation is bullish. It is showing that price should continue its upward movement overall for now (remember, this is a 'weekly' chart). Divergence should not be used by itself to determine entry for a trade. It should only be used as a confirming indicator. Look at the second weekly chart which is an up-close shot which shows another good reason for GBP/JPY to be considered bullish from a Weekly perspective. As I mentioned last week (Post #49), we had been in a weekly wedge/triangle for five straight weeks and were looking for a breakout. We got it last week. The weekly candle closed above the previous week's high, which should be considered bullish from a weekly standpoint. Momentum has also turned sharply upwards indicating more bullish action for now. The weekly TFT on my chart is presently around 238.70. We could see a move to at least that point or higher before price turns bearish again.

M2B

The Daily Chart seems to define bullishness even more. We finally got a close above the Daily bearish trend line pointed out in last week's Daily Chart post (Post #50). Also pointed out last week was that the QQE was about to cross above the 50 line which has indeed happened. The Momentum on my chart, which just updated at 00 GMT, has turned up to a slightly bullish angle. And the final bullish kicker to this chart is something I noticed almost accidentally. The 5SMA, which is considered the 'true' price of a currency, crossed down on the 50EMA back on July 27. Price did rebound about 500 pips after the cross down (a 50% retrace which bounced off of the 50EMA) and then ran down 2500 pips over a period of eight days. The 5SMA is just now getting ready to cross back up on the 50EMA. To me this is a bullish sign (if it completes the cross). Just above is the Daily 200EMA which on my chart is right at 235.50. Sound familiar to anybody? If that line is successfullly breached and closed above, 238 should be the minimum we will see within the next few weeks.

M2B

Well, it looks like I got lucky last week with my analysis on the 4H chart (Post #51). Using the overbought Stochastics I thought price would initially go down before finishing up for the week. Price did move down starting last Sunday night, ran down 350 pips, and then turned around and ran up 550 pips to close up alomost 200 pips above last week's open price. I am seeing something similar for this week based upon the 4H chart. All of the other higher TF's seem to be pointing bullish and yet the 4H chart is currently overbought and the momentum is bearish. I think we will see an initial move down, probably not as drastic as last week. I am thinking it will drop back to either the TFT around 233.80 (purple line), the 200EMA around 233.40 (orange line), or the 50EMA around 232.80 (aqua line). Momentum will play a factor in how far down it could drop before taking off again northward.

With that all being said, I know there are some who are calling for the GBP/JPY to fall off the face of the earth this week with a huge downward plunge, but all I am doing in these charts posted above is elaborating on what I am seeing in the charts, not on what I think could/should happen based upon current events. Remember, charts are purely technical. They do not take into consideration any future fundamental happenings, but they are a reflection of past fundamental happenings. That is why I prefer technical analysis when trying to determine the longer term direction of price in a currency instead of trying to guess how the market might react to upcoming news. Have a great week.

M2B

DOW chart attached and the weekend removed from the cycle (MT4 problem, not mine). Therefore, next cycle period will come this Wednesday (3rd Oct). Is that the big day?

I'll be expecting a retrace back to the 235.5 area (possibly slightly lower to 235.2) and then a nice bounce up to the 238 area, followed by another bounce back to 235.

Now if the BOE is GBP positive, that could crumble the 238 resistance quite easily - so be cautious during that announcement. However, it really depends on where price is at that time.

I believe the retrace is complete and we are now heading for 238.

edited

An update on the two charts above. I believe we have now topped so are heading back down to the 235/234 region.

ive posted my weekly analysis here:

http://www.forexfactory.com/showthre...=1#post1630716

it was just easier to post it in on place--keepin a record of it on my journal too !

Daily chart is very bullish, so is the 4H, price completed it's daily 61.8% retracement from it's last fall to 219 area. Where will price go next? It could retrace back to the daily 50% fibo to see if it supports or not, or it could still go higher, the trendline is still supporting this upward trend, I wouldn't short this pair unless the TL gets broken and retracement for this last upward movement starts. I've also drawn a new fibo for this last daily swing (assuming this is the top, otherwise this fibo is invalid), you can see the 38.2% fibo (green) is very to close to the daily 50%, so it could retrace to that area and then bounce back up or it could retrace to it's favorite fibo level which is the 50%. This week should be interesting and lots of pips for us to grab.

http://img507.imageshack.us/img507/6210/4hhr5.gif

http://img512.imageshack.us/img512/8792/1hjg2.gif

CHART #1

The Monthly charts aren't usually that interesting for intraday traders but some interesting developments this past week have added to the significance of the Monthly chart. The first Monthly chart is an up close shot showing long term continued bullishness in this pair. QQE is bearish and Momentum is still pointing down but both of these indicators have softened in their angle of descent. The huge pin bar in August gave us a bullish September and could very well lead to bullishness throughout the end of the year. Based upon the Monthly chart alone, I can see GBP/JPY retesting the 251 area we saw back in July. There is a bullish trend line around 231.40, and TFT is in that same area, around 230.60. Both of these lines should create support for GBP/JPY in the weeks ahead. To me, it would take a monthly close beneath the TFT/trend line area to re-establish bear momentum. After market close on Friday, price hit 239.02 on my charts which is 'exactly' where the Monthly 5SMA is on my charts. IMO we will probably see a bounce down from there at the beginning of next week. I have drawn Fibs based upon 239.02 being the high. If there is a bounce, we could see price fall back to the 38.2 Fib, around 231.60, or the 50 Fib, around 229.25. (See also the Weekly chart post for possible retrace levels). So we could see a major retrace from this current level and still remain in a bullish uptrend for now. Remember, that trend line/TFT area is the significant spot signaling potential reversal.

CHART #2

The second chart is a broader view to show one significant item. The last time the Monthly 50EMA was above the 200EMA was December of 1981 (26 years ago!). We are very close to seeing the 50EMA cross back up on the 200EMA. There is only a 150 pip gap separating the two. A cross up would be considered very bullish.

M2B

CHART #1

The Weekly chart is looking very bullish as well. There is a bullish weekly trend line supporting around 233.50 for the coming week (my chart will not technically close the week until 00 GMT Monday morning). Notice also the 5SMA and 50EMA are both right around the 233.30 area. These will shift upwards by Monday morning. The 5SMA will have crossed up on the 50EMA to around the 234.50 area (my guess) and the 50 EMA will have moved up 20 or 30 pips, I'm sure, to around 233.50 or so. Last week, the Weekly TFT was around 237.50 and provided very strong resistance until the end of the week when it was convincingly breached. The TFT has now turned down further, another bullish sign, and the Momentum is still looking very bullish as well. We are due for a retrace based upon Monthly chart info (see above post). I listed potential retrace levels in that post but I would also like to list the Weekly 50EMA as a potential retrace level, around 233.30-50, which is also where the weekly bullish trend line kicks in. Notice also that the weekly QQE is close to crossing up on the the 50 line and Momentum is about to cross up over the '0' line.

CHART #2

I decided to go ahead and add this second look at the Weekly chart to show you a possible projection based upon the break-out, two weeks ago, of the triangle/wedge that had formed over the previous 5 weeks (see Post #49 and #62). Seth Gregory, a well respected and successful Forex trader who recently hooked up with FXCM, taught a rule (theory?) regarding triangle break-outs. Here is the general rule. Once price has closed outside of a symmetrical triangle, price will continue to run in the direction of the breakout until the vortex of the triangle crosses. Looking at the Weekly chart, the vortex (purple vertical line) won't cross for another two to three weeks. This is another reason why I believe price could continue to rise for at least another few weeks, which, by that time, could take us back up to the 251 area. (Google 'Seth Gregory' and 'symmetrical triangles' for more detailed info on this subject). There is also a formula that can be used to determine approximately how far price could move in this type of break-out scenario but I have forgotten how it works. Sorry. I just wanted to show you the triangle/vortex projection so we can watch it together over the next couple of weeks and see how accurate it proves to be.

M2B

The Daily Chart confirms more bullishness, though a significant retrace seems paramount. Last week (please see Post #63) I drew your attention to the 5SMA crossing up on the 50EMA, which indeed occurred. The last time a cross 'down' happened, there was a 500 pip retracement back up to the 50 EMA. Though no two conditions and indicator scenarios are ever totally alike, I don't think a 400 to 500 pip retracement at this point should be ruled out. The one factor that could prohibit that much of a retracement would be the strength of Momentum on the Weekly and Daily charts. By 00 GMT Monday morning the Daily 50EMA will move up to around 235 and the TFT should move up to around 234.50. Retracement could touch either of those areas, or perhaps just bounce back to the 200EMA around 235.50, which should prove to be very strong support at this time. Price has convincingly closed above the Daily 200EMA this week which, along with the Monthly and Weekly signals, should signal continued bullishness in the weeks ahead.

M2B

The 4H is a little tougher to project at the moment. Yes, it appears bullish and we did just have a confirming cross on the QQE (though I understand that other MT4 charts showed this a while ago, thus my hesitancy on this particular chart). We could initially see more upward movement to start the week, but based upon the higher TF's we are definitely due for a significant retrace IMO. The only thing I want to point out on the 4H is the bearish divergence that is forming on MACD to price. Remember, divergence is never conclusive by itself, and should never be used alone as an entry indicator, but it is showing that price is getting top heavy (overbought) and will need to take a breather before too long. Price could start down beginning Sunday night or we could see it move up more initially before retracing down. The one major factor causing me to believe price will not move up much further before a retrace, if any at all, is the Monthly 5SMA which is at 239.02 on my charts, which is also right where price currently resides. Have a great week.

M2B

analysis for the coming week:

http://www.forexfactory.com/showthre...81#post1643681

I won't waste much time on the Monthly Chart this week. See post #72 from last week for more details since not much has changed since then. The 5SMA has gone up a few pips to around 239.13. I added the Stochastics on this chart to show that the signal line is parallel with the 50 line and threatening to cross up on the slow red line. Overall I think the Monthly Chart is showing more bullishness, though I still don't think we have seen the full bump down from price hitting the 5SMA area. I realize price moved up almost 150 pips above the 5SMA, but from a monthly standpoint I still think the Monthly 5SMA qualifies as a resistance point. Because of that, I still think we will see a significant move down, perhaps 400 or 500 pips, before we see a big move back up.

M2B

This past week didn't quite go the way I thought it would (at least things haven't developed as quickly as I thought they would). I came to an understanding by the middle of last week that it would probably end up being a week of consolidation.

I'll be honest with you. At the moment I'm a little perplexed. Look at the last two Daily candles; pin bars in opposite directions. I never posted it in the Weekly analysis thread, but by Monday of this week I began thinking that this week's candle might end up being a doji. Right now price is basically right where it started the week. I think we still have at least a couple more weeks of bullishness left before any major move down, but this week might end up being a week of consolidation. You can read Aus's Weekly analysis thread to get more details on why I see more bullishness in the weeks ahead. I don't want to waste space here on it. (Post #38985, Page #2599- Aus's Main Thread; posted 11:11 PM EST, OCT 10).

I still see at least three more weeks of bullishness based upon last week's info I posted (Post #73). I have added Stochastics on this chart showing price still has room to move up before being overbought, and there is good separation on the two Stochastic lines. QQE has crossed the 50 line on my chart. I'm not sure where the Weekly 5SMA will be when my weekly candle officially closes at 00 GMT Sunday night, but the weekly price hasn't touched the 5SMA for two weeks now. Though price has gone three and four weeks or more, in the past, without touching the 5SMA, it is more common for price to touch the 5SMA almost every week. Because of last week's consolidation, I am looking for a downturn at the beginning of this week before price shoots back up again. Last week only saw a 200 pip bounce down. I think this week it will go lower before shooting back up. We could end up seeing a dip down to the 235 area followed by a move up above 240+. The blue line underneath price is the Weekly bullish trend line. By the time the new weekly candle opens in a few hours, that trend line will hit around 235.50.

M2B

It's hard to draw conclusions on a chart which has just posted dojis on 5 of its last 6 candles. (Please don't send me PM's on what a true doji is.) From open to close on my daily candles last week, the average number of pips (minus a spread of 7) was 17 pips! (And the only reason it's that high was because Friday had an open to close difference of 59 pips). Yes, it was a week of consolidation. Therefore, I still stand by my ideas posted last week for this upcoming week. A movement down to perhaps the 200EMA, around 235.50, followed by a move back up to the 240+ area. It's hard to say how far back up it might recover by the end of the week. Please note something I informed you of last week on the Daily Chart, though the chart itself didn't show it. This week's Daily Chart shows it well. The Daily 5SMA crossed down on the 50EMA on July 27. Price then consolidated (ranged) for about ten days before finally shooting back up to touch the 50EMA, followed by a big move back down. On October 1, the Daily 5SMA crossed up on the 50EMA. Price has been ranging since then (for the last ten days). The range periods, and the range sizes, have been almost identical up to this point. I think the Daily is due for a touch of the 50EMA, which is right around the 235.50 area. My guess is that price will then shoot back up for a few more weeks at least.

M2B

I will not repost the chart of MACD from last week showing bearish divergence. See Post #75 for more details. I do still believe that the 4H divergence is still in play and that price will drop dramatically as a result of it. The 200 pip bounce down we saw last week did not fulfill the divergence set up on the 4H Chart. There is a potential head and shoulders pattern setting up on the 4H Chart as well right now. If this is a head and shoulders pattern, price has pretty much achieved the peak of where the right shoulder should be and we should begin to see price drop from basically the beginning of the week. The neckline is currently around 237.50, and a break of that would just about guarantee a fall to the 200EMA, which is around 235.50. Have a great week.

M2B