GBPJPY Plunges Lower Following The Formation Of A Failure Swing

GBPJPY Analysis: Price Plunges Lower Following The Formation Of A Failure Swing

GBPJPY plunges lower following the formation of a failure swing. The market has been in an upward trend since the beginning of the year. However, the RSI (Relative Strength Index) is currently indicating that the market is in an overbought state. This implies that GBPJPY has been overpriced; therefore, a retracement or a total reversal is impending.

GBPJPY Significant Zones
Demand Zones: 155.350, 148.630
Supply Zones: 169.000, 172.130

Until the beginning of 2023, GBPJPY was in a correction phase on the higher timeframe. The first impulse of the upward trend began at the 148.630 price level. This was after an aggressive immersion of the price into an extremely oversold state. The last candlestick into the extremely oversold state was a Doji. This happened immediately after the creation of a vacuum gap on September 19, 2022. The aggressive plunge into the extremely oversold state was not surprising, however. This is because the market has been on an aggressive decline since the failure of the consolidation phase.

Following the indication of the RSI that the market was in an extremely oversold state, the market swerved upward. The doji candlestick revealed that the bears have exited the market while the bulls are beginning to take control. Following the formation of the doji candlestick, the GBPJPY skyrocketed to the upside. As the uptrend continued, higher lows were created at the 159.730 and 164.870 price levels. Following the invalidation of the relatively equal highs at 161.530, the price flipped upward. This, therefore, changed the market’s environment on the daily timeframe to the upside.

Market Expectation

A failure swing has been created on the four-hour chart. The failure swing might lead to a new trend or a correction phase into an oversold state. The current trading range of the market is between 172.330 and 165.420 price levels. GBPJPY is expected to still plunge downward while invalidating the previous low of 168.050.