USD/JPY Correction and GBP/JPY Surge Highly Likely Today
GBPJPY Channel Resistance | Potential Bounce at 175.50
GBPJPY is on a strong uptrend, with the pair bouncing up and down inside a rising channel pattern on its 4-hour forex chart. This could be a sign that further gains are in the cards, if fundamental factors support a continuation of the trend.
Stochastic is reflecting the presence of buying pressure, as the indicator is still making its way up to the overbought zone. Similarly, price is also making its way higher and probably gearing up to test the channel resistance near the 175.50 minor psychological level.
The top of the channel has held as resistance for quite some time and might continue to do so. A selloff from the 175.50 area could lead to a drop back to the bottom of the channel, which is near the 170.50 minor psychological level. A weak selloff might just last until the mid-channel area of interest near the 172.00-172.50 levels.
A strong break past the channel resistance could lead to stronger gains for GBPJPY, as price could break past the 176.00 handle and the 176.50 minor psychological barrier. Reversal candlesticks forming at the top of the channel or stochastic reaching the overbought zone could be a sign that resistance would hold.
USDJPY Bearish Divergence | Overdue Market Correction
On its longer-term time frames, it can be seen that USDJPY has been on a sustained climb in the past few weeks, leading to speculations that the move might already be overdone. Stochastic is already indicating overbought conditions, which suggests that a correction is due.
At the same time, a bearish divergence can be seen, as price made higher highs while the oscillator drew lower highs. Once stochastic crosses down from the overbought area, it could be a sign that dollar bears are ready to push price back down.
A pullback to the 105.00 levels might take place, as this lines up with the previous highs. A deeper correction could go as low as the 101.00 major psychological support zone while a break below this would confirm market reversal
Depending on the outcome of the FOMC statement, USDJPY still has a chance at breaking past the 107.00 levels, which could then pave the way for more gains for this pair. Hawkish remarks from Janet Yellen could lead to sustained gains for USDJPY, as BOJ Governor Kuroda has expressed openness to further easing and keeping stimulus in place much longer if the economy weakens.
USDCAD Retracement to Support | Bounce off 38.2% Fibonacci Level
USDCAD has made a sharp pullback recently, after peaking close to the 1.1100 major psychological level. Since then, price has retreated to the 1.0950 area, which lines up with the 50% Fibonacci retracement level. Stochastic has already reached the oversold level, which suggests that a bounce is in the cards.
At the same time, a bullish divergence can be seen since price is making higher lows while stochastic had lower lows. This area of interest is also in line with a former resistance level and might act as support for now.
A stochastic crossover above the oversold zone would confirm that buyers are back in the game and ready to push USDCAD higher, possibly until its previous highs near the 1.1100 mark. However, a deeper pullback could still happen until the 61.8% Fibonacci retracement level, which is close to the 1.0900 major psychological mark.
Reversal candlesticks at the Fib levels might also be indications of a short-term bounce and a resumption of the previous climb. However, a break below the 1.0900 handle could be an early indication of a reversal and could push USD/CAD to the next support area at 1.0800-1.0850.