GBP/JPY Drops After it Bounces off the 158 Level With a Head and Shoulders Formation

In the past few days, we are experiencing a classical flee to safe havens, like the Yen. In today’s analysis, we would like to discuss one of traders’ favorites, the GBPJPY.

Here, the sentiment is of course negative but we actually saw the first signs two weeks ago, when the price bounced off a crucial horizontal resistance on the 158 level (green). The bounce from that resistance helped create the head of the big Head and Shoulders pattern (yellow). That Head and Shoulders was actually the ultimate bearish signal that the price is currently following.

The initial drop after the neckline was broken was very sharp. Then we saw a small correction, which apparently came to an end as Friday brings us a drop again. Sentiment on GBPJPY is definitely negative with the target being the long-term horizontal support on the 149 mark (orange). It seems, that sooner or later the price should be able to get there.

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