GBP/JPY Breakdown: Massive Short Opportunity or Bear Trap?
Overview:
GBP/JPY has been a strong focus, and for those following along, we’ve been anticipating short opportunities as the market structure continues to favor downside momentum. Recent price action has set up another potential short entry, aligning with our long-term bearish bias.
Weekly Timeframe: Major Rejection & Momentum Shift
• Double Top Formation: GBP/JPY formed a classic M pattern around 198.89, rejecting that level twice before reversing.
• Break of Key Support: The critical support level at 189.94 has been tested multiple times, acting as a floor before it finally broke last week with strong momentum.
• Volume Confirmation: The breakdown occurred with increased volume, signaling real selling pressure and further validating bearish sentiment.
Daily Timeframe: Retracement & Liquidity Grab
• Impulse Move Lower: After breaking support, GBP/JPY dropped aggressively, marking a fresh lower low.
• Pullback to Trap Buyers: The market retraced back up, but this was more than just a normal correction—it was a liquidity grab.
• Traders who went short too early had stop losses at key resistance levels, and price wicked up to stop them out before resuming downward.
• Instead of a smooth retracement, we saw sharp moves up, which is a telltale sign of liquidity collection before continuation.
H1 Timeframe: Entry & Trade Execution
• Structure Shift:
• Initially, price was making higher highs and higher lows within the pullback phase.
• However, we broke that bullish structure, confirming the reversal.
• Retest Confirmation:
• Price tested the breakdown level, creating a strong entry opportunity for shorts.
• Entry Execution:
• First Entry: Placed a small short position as price retested.
• Second Entry: Increased position size once the breakdown was confirmed with a bearish close.
Key Invalidations & Targets
✅ Bearish Scenario (Primary Outlook):
• As long as price stays below 192.32, shorts remain valid.
• If momentum continues downward, targets include:
• First target: 189.94 (previous key support, now resistance).
• Next levels: 187.50, then possibly 185.00 if momentum follows through.
❌ Invalidation (Bullish Breakout Scenario):
• If GBP/JPY pushes above 192.32, holds, and breaks 192.98, the bearish thesis is invalid.
• In that case, we may see a continuation higher, forcing a cut on shorts and a reevaluation of market conditions.
• Stop Loss: Set above 192.98 at 193.06 to protect against a breakout reversal.
Conclusion:
GBP/JPY remains in a high-probability short zone, with technical confirmations aligning on multiple timeframes. If price remains under key levels, we expect further downside, with liquidity already being grabbed from early sellers. However, as always, if price invalidates the setup by reclaiming resistance levels, risk management is key.
📉 Short bias remains intact unless 192.32 is broken and held.
🔹 If you found this breakdown useful, make sure to like, share, and let us know your thoughts. If you see an alternative setup, drop your analysis—always open to different perspectives! 🚀
GBP/JPY has been a strong focus, and for those following along, we’ve been anticipating short opportunities as the market structure continues to favor downside momentum. Recent price action has set up another potential short entry, aligning with our long-term bearish bias.
Weekly Timeframe: Major Rejection & Momentum Shift
• Double Top Formation: GBP/JPY formed a classic M pattern around 198.89, rejecting that level twice before reversing.
• Break of Key Support: The critical support level at 189.94 has been tested multiple times, acting as a floor before it finally broke last week with strong momentum.
• Volume Confirmation: The breakdown occurred with increased volume, signaling real selling pressure and further validating bearish sentiment.
Daily Timeframe: Retracement & Liquidity Grab
• Impulse Move Lower: After breaking support, GBP/JPY dropped aggressively, marking a fresh lower low.
• Pullback to Trap Buyers: The market retraced back up, but this was more than just a normal correction—it was a liquidity grab.
• Traders who went short too early had stop losses at key resistance levels, and price wicked up to stop them out before resuming downward.
• Instead of a smooth retracement, we saw sharp moves up, which is a telltale sign of liquidity collection before continuation.
H1 Timeframe: Entry & Trade Execution
• Structure Shift:
• Initially, price was making higher highs and higher lows within the pullback phase.
• However, we broke that bullish structure, confirming the reversal.
• Retest Confirmation:
• Price tested the breakdown level, creating a strong entry opportunity for shorts.
• Entry Execution:
• First Entry: Placed a small short position as price retested.
• Second Entry: Increased position size once the breakdown was confirmed with a bearish close.
Key Invalidations & Targets
✅ Bearish Scenario (Primary Outlook):
• As long as price stays below 192.32, shorts remain valid.
• If momentum continues downward, targets include:
• First target: 189.94 (previous key support, now resistance).
• Next levels: 187.50, then possibly 185.00 if momentum follows through.
❌ Invalidation (Bullish Breakout Scenario):
• If GBP/JPY pushes above 192.32, holds, and breaks 192.98, the bearish thesis is invalid.
• In that case, we may see a continuation higher, forcing a cut on shorts and a reevaluation of market conditions.
• Stop Loss: Set above 192.98 at 193.06 to protect against a breakout reversal.
Conclusion:
GBP/JPY remains in a high-probability short zone, with technical confirmations aligning on multiple timeframes. If price remains under key levels, we expect further downside, with liquidity already being grabbed from early sellers. However, as always, if price invalidates the setup by reclaiming resistance levels, risk management is key.
📉 Short bias remains intact unless 192.32 is broken and held.
🔹 If you found this breakdown useful, make sure to like, share, and let us know your thoughts. If you see an alternative setup, drop your analysis—always open to different perspectives! 🚀
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.