FX.co ★ Elliott wave analysis of GBP/JPY for October 29, 2020

Risk-off sentiment dominated the financial markets yesterday after many European countries announced new lock-downs in their efforts to curb the coronavirus. EUR weakened amid such news while JPY rose, which clearly was seen in yesterdays price-action. GBP/JPY broke a key support at 136.26 which called for more downside pressure towards 135.37 and 135.18. GBP/JPY did more than that and bottomed at the 61.8% corrective target of wave i/ at 134.86. After bottoming at 134.86, GBP/JPY grew significantly indicating a solid bottom could be in place and wave iii/ finally being in motion. To confirm this is the case, we need a break above resistance at 136.50.

Only a break below support at 135.24 will indicate that wave ii/ still is in motion and a new test of support at 134.86 should be expected, but the potential downside may be limited now.

R3: 136.50

R2: 136.17

R1: 135.92

Pivot: 135.79

S1: 135.61

S2: 135.24

S3: 134.86

Trading recommendation:

We took 50% profit off our short position from 136.20 at 135.45 and we will sell the final 50% here at 135.92 for an average of 135.69. We will re-buy GBP at 135.70 or upon a break above 136.55