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Contributors GBPJPY hits 50 fib & shows potential for pullback

alpariThe GBPJPY pair has been consolidating between the 181 and 184 levels over the past fortnight, following engagement with the 50% retracement of the 2008 highs to 2011 lows. This could be a major level for a retracement and given the respect clearly shown by the last two weeks price action, it would not be a surprise to see the pair move lower in the coming days.

The monthly chart below shows the massive strength of the uptrend in this pair over the past two years, with the largest selloff coming back in January 2014. Now the fundamental picture looks bearish for the Yen given the recent implementation of a greater degree of asset purchases, yet this 50% retracement is clearly a major level right now. 181114dOn the four hour timeframe, there is a clear respect of the 50 fib, but also the 181 level, which currently appears to be representing the neckline of a topping formation, be it a head and shoulders, double or triple top. Ultimately, the resolution of this current sideways trend will come once price breaks above 184 or below 181. Should we see the break lower, I would be looking for a major support level of 177.4, which is the projected height of the current formation from the breakout.  However, from a fundamental and trend following point of view, the pair still looks bullish in the medium to long term. Thus even if we did see a move lower, I believe the pair still has further to go higher. 181114e

About Joshua Mahony

josh mahonyJoshua Mahony is Research Analyst at Alpari UK. Having joined in 2012, Josh’s previous experience in the industry includes time spent on the trading floor at Barclays Capital and working for Deutsche Bank in New York for a year. Originally coming from an economics background, Josh then traded equities in the wake of the 2007/2008 financial crisis. He is now turning that experience towards the forex markets. Josh writes market commentary that has featured on websites and publications including the Financial Times, Reuters, the Guardian, ABC News, CityAM, the Washington Post and the Miami Herald. You can follow Josh’s analysis on Twitter, and Google+

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