“INDICATOR OF THE DAY” - FORMER SUPPORT TURNED RESISTANCE
Gbp/Jpy: One technical indicator that we incorporate into our analysis is “former support turned resistance.” Quite often, when a market finally does manage to break channel support, it will race higher before eventually pulling back once again. It is very common for a breakdown to pullback to the previous support area, before heading lower once again. In the example below, Gbp/Jpy has just broken major bull channel support off the 2009 multi-year lows and is currently in the process of bouncing after finding some support by the 100-Day SMA. However, any rallies from here should now find some resistance by the former support which currently resides just over 155.00. We issued a sell recommendation earlier today.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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