I was analyzing the pair of GBPJPY at the beginning of this month, (June 8th), when an inside bar formation appeared at an important S/R (support / resistance) level. I predicted then declines, which occurred and after three weeks the quotations reached the next S/R level, dropping nearly 700p.
On the daily chart in the past week there was an outside bar – a bullish engulfing pattern.
Despite three attempts to break out above the top, the price is still within the range of the candle forming this formation, which may signal a false break-out and a supply supremacy.
The price action is currently taking place on the support of the growth channel and the mentioned level S/R = 131.75, which at the same time coincides with the minimum of the outside bar. The resulting support confluence is a bastion of demand. However, if it is overcome, falls will continue.
Level 131.75 seems to be the key for this pair – only if it is successfully overcome will a downward scenario be triggered.
In chart H4 we see two demand zones, 131.00 and 129.65. The downward scenario assumes upward corrections when the price reaches each of them, marked with arrows.
However, if demand overcomes the supply and the price will finally break out of the formation – this will negate the declines and the pair may move north again towards the resistance of the channel.
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