Nick Nasad
All posts from Nick Nasad
Nick Nasad in Nick Nasad,

GBP/JPY - Is Recent Consolidation Re-Accumulation or Distribution?

I'm looking at the GBP/JPY this morning in the 4-hour time-frame, as it is setting up in a nice consolidation/sideways range. The question for me is whether this almost 3-week sideways action is a period of re-accumulation following the 3-week rally in the prior prior, or is it a period of distribution, where the longs are getting out and we may be setting up for a slide through 157.50.

  • The longer the consolidation, the more energy is being built up for a potential breakout.
  • I have two main scenarios for the bearish outlook:
  • The first is that we have a move back to resistance at 159.95 (or slightly above) which flushes out any weak shorts and gives longs a final chance to cash out. From there we have a move downward that breaks out of the support level.
  • The second bearish scenario would skip the move back to resistance and make its move through support from these levels. In that scenario, we would like to see a clean break with increased price action volatility, which is followed by a retrace to the old level of support at 157.50 and that would give technical traders a "second-chance" entry to catch the breakout. 
  • For either scenario to happen, it would help to see risk sentiment weak - with equities falling to end the week (start next week if we continue to move sideways until then.

- Nick