GBP/JPY bearish reversal likely after distribution (H1)1. Wyckoff Methodology: Distribution Phase
PSY (Preliminary Supply): The chart starts with a bullish trend around 188.000, indicating strong buying demand. However, the PSY suggests that large traders are starting to take profits.
BC (Buying Climax): The BC is a significant high around 192.303. This price level represents the peak of buying pressure, where sellers are expected to step in.
AR (Automatic Reaction): Following the climax, the price retraces, forming an AR, marking the start of distribution as supply begins to overwhelm demand.
ST (Secondary Test): Around 191.600, the price retests the high, failing to break it, confirming the ST in the distribution phase.
UT (Upthrust): Around 193.000, the price makes another attempt to break higher but fails, leading to another retracement.
UTAD (Upthrust After Distribution): This occurs at the peak, a fake-out above the prior highs, signaling the final effort by the composite operator to distribute positions before a price reversal.
Current Location: The chart shows that the pair is in the Phase B of distribution, with the UTAD being completed. This signifies that the large distribution has ended, and a potential downtrend is imminent as we approach Phase C.
2. Elliott Wave Analysis
The wave structure follows the classical 5-wave pattern within the corrective phases.
Wave 1: The chart starts with an upward impulse, pushing into the Buying Climax around 192.300.
Wave 2: After the BC, a corrective wave retraces to around 190.000 (an automatic reaction from Wyckoff).
Wave 3: The next upward movement to 193.000 represents a strong impulsive wave, which typically is the longest and most aggressive.
Wave 4: This corrective wave retraces to around 190.500, but holds support just above the 0.618 Fib retracement.
Wave 5: The final push-up shows the climax and completes around 192.800, forming the UTAD from Wyckoff.
Current Elliott Wave Stage: The chart is likely entering an ABC correction, starting from the UTAD, indicating a large retracement to follow.
3. Harmonic Patterns and Fibonacci Levels
Fibonacci Retracement Zones:
0.786 at 192.131 serves as a major resistance level, aligning with the Wyckoff AR distribution resistance.
0.618 at 191.194 is a key support level, below which prices could fall deeper into a corrective wave.
0.5 (190.537): An important halfway retracement support zone, which coincides with the weekly close levels, and is likely where the price will stall temporarily.
ABC Correction Forecast:
Wave A is expected to drop to around the 0.618 Fib level (191.194).
Wave B will likely bounce from this support, aiming to test the 0.786 retracement at 192.131.
Wave C would then follow, breaking down to a deeper support level around the 0.5 retracement at 190.537.
4. SMC and ICT Concepts (Liquidity and Smart Money Involvement)
Liquidity Zones:
The Wyckoff phases and Fibonacci levels clearly indicate liquidity being built up around these zones. The UTAD marks a liquidity grab, where smart money is attempting to trick retail traders into believing a breakout will occur. The major support level at 190.537 is a likely target where large orders will accumulate again, leading to future reversals.
ICT Mitigation Zones:
The chart shows potential mitigation zones where institutional orders were likely placed between 192.131 and 191.194. Price will likely react heavily to these areas due to prior order imbalances.
5. Forecast and Future Outlook
Bearish Reversal Expected: The completion of the UTAD phase in Wyckoff combined with the completion of Wave 5 in Elliott suggests a bearish reversal is highly likely. Price will target lower Fibonacci retracement zones, potentially testing 190.537 and even deeper if the downtrend extends.
Invalidation Points:
Any bullish break above 193.532 would invalidate the current bearish outlook and indicate further upside momentum.
Conversely, a break below 187.422 confirms a larger downtrend is in motion.
Risk/Reward Evaluation
Stop Placement: The stop is set at 193.532 (just above the Wyckoff UTAD), with a risk/reward ratio of 20.71, indicating a highly favorable reward for this trade setup.
Targets:
Target 1: 191.194 (Fib 0.618).
Target 2: 190.537 (Fib 0.5).
Target 3: 187.422 for deeper corrections aligning with Wave C.
Conclusion
The chart represents a highly complex setup incorporating Wyckoff distribution, Elliott Wave theory, Fibonacci retracements, and SMC/ICT concepts. Based on this, the market is expected to enter a bearish corrective phase, targeting key Fibonacci levels and liquidity zones around 191.194 and 190.537, before potentially resuming upward movement.
