The Itchy Guppy: GBP/JPY Analysis using Ichimoku Kinko Hyo

That’s a bit of a misnomer, but I altered the spelling to make it seem like a pun. Yes, a towering wit is on parade this afternoon, ladies and gentlemen.

Here’s GBP/JPY on the daily overlaid with Ichimoku Kinko Hyo where all aspects of IKH are aligning to signal further upside.

Some of what follows will seem obscure if you’re unfamiliar with IKH, which can be remedied by reading the first two segments of the Ichiwiki. I also am unfamiliar with IKH, but I now know the Japanese vocabulary for its features, so I will masquerade as a sophisticated analyst who is in fact only a charlatan exploiting the relative ignorance of those reading concerning the topic discussed.

• To begin with, something non-IKH specific: an ascending triangle (two straight white lines) from the pair’s mid-March nadir is well into it’s consolidation. The horizontal line marking resistance in the 209 area has been touched and rejected the advance three times over the last two months; but conditions are improving for a break.
• The cloud, or kumo of IKH is a shaded area bounded by two lines, Senkou Span A (SS-A) and Senkou Span B (SS-B). SS-A covers fewer periods of data (half as many as SS-B), so it is the faster line, behaving similarly to a stochastic oscillator. As you can see, SS-A (green) crossed SS-B (yellow) on May 20-21, shifting the kumo’s bias upward. Notice that a bearish (yellow) cloud was present on the two touches from mid-April and early May, but not from May 30. Meanwhile, the ascending triangle continues to consolidate.
• The Chikou Span (light blue line), which shifts the most recent closing price back 26 periods to represent current price v. historic price, is higher than the price exhibited where the Chikou Span ends; also indicative of further upside potential. Note though, that the Chikou has, with the exception of May 30’s flukish blip above 209, found resistance along the dashed green line just shy of 208.
• The other two lines that make up the overlay are the faster blue (Tenkan-Sen) and slow red (Kijun-Sen) lines. A classic strategy used by IKH practitioners is the Tenkan-Kijun crossover, which are in no short supply across the chart. The one of primary interest is the latest cross from May 23. The bottom-up cross of Tenkan over Kijun is considered a strong bullish signal because it occurred above the cloud. Notice how price has found support at the top of the cloud by SS-A since that point.

In sum, the technical picture that arises from IKH on the Daily is a bullish one, but subject to confirmation on a breakout from 209, or even a sustained close above 208.41 (the 23.6% fib retracement of 212.77 to 194.36 – not pictured above). I’ve been playing contrarian in the short-term against this medium/longer-term corrective leg from 192 after the decline from 252, but watching to see what plays out. Will it be a resumption of the trend down after more stalling @ 209, or will price advance above 209 and then the 213 region to negate the corrective scenario in favor of a fresh trend upward?