Analyzing a Dull Rally

This video discusses the current movements in the GBP/JPY from a long term perspective in a daily char. It also examines the "dull rally" it has experienced after falling sharply in August, and signs that may point to a turnaround.

After the pair's strong move downward in August, its rally in September has been labored and "dull". Tehchnical indicators are moving against the pair. The short term moving average was broken by price action heading downward, and the short moving average has even crossed the long term moving average, signalling a sell setup may be approaching.

As the market heads to the next resistance zone, a period of consolidation between 238 and 244, it has accelerated however. Therefore one should be cautious before following the moving average sell signal alone, and selling before seeing further signs and signals of reversal.

Momentum is currently strong as Stochastic has not turned down after penetrating the 80 level, and RSI is not near its overbought level. However, we should see what will happen to this pair this week after Monday's strong rise, and whether buying momentum slows down.

We will return next week with a look at how the pair did.

The analysis uses 2 Moving Averages, one a 50 period, the other a 200 period. To measure momentum the Slow Stochastic Oscillator is used, and for overbought/oversold levels, the Relative Strength Index.

The daily chart as it is displayed in the video is presented below:

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