Technically GBP/JPY

8hr Period

The 8hr period at this time shows better the current situation than either the 12hr or the 4hr charts. We see a potential 123 bottom ending at 208.00 which is above the recent swing low of 206.98, the 61.8% retracement of the major trend run up to 250.00 (as seen on our monthly chart).

The concept of the 123 bottom is supported by divergence in both the MACD and the Stochastics to price, as well as in the MACD histogram.

The 8 hr EMA's are clearly showing the downward momentum however and though you cannot see it well on this chart, there is a short term head and shoulders pattern that was just broken, for that we move forward to the 1hr chart below.

1hr Period

Through price Action the last half of the previous week trading has built up a head and shoulders pattern which was broken at the end of the UK session on Friday. The breaking of the neckline in this formation was a bearish signal and any hope of the previous 123 bottom is dashed as long as the neckline holds. If the low from last week breaks we can look for the deeper price targets projected to the 205 area projected from the head of this head and shoulders to a loftier target of 200.00 based on projections from the pattern in our weekly chart.

Midterm juicy bear targets are dependent on our low breaking ( 206.98 ). When that happens all eyes should be looking towards the 200.00 level.

On the Bull side we have to negate the hourly head and shoulders by breaking above the neckline (209.80 and the 38.2% retracement from the down move starting at the head). Should the neckline break next targets (taking fibo form the run down from the high of this year) are 213.57 (32.8%) and 216.88 (61.8%), breach of the high at 222.09 could signal a return to the carry trade technically speaking. Breaking the high would be a bullish signal, and since this area also breaks the neckline of the larger Weekly head and shoulders pattern we could be looking at some major upside potential. Lets just see what happens!