Forex Video Briefing (10/27) – GBP/JPY Breakout
In the 4H chart, we can see that GBP/JPY broke above a falling trendline from the 180.70 high in August, which is also the 2014-high so far. The breakout shifts away from the bearish outlook in the short-term, as price crosses above the 100-, and 50-period SMAs, and the 4H RSI breaks above 60 to show loss of bearish momentum.
However, there will be some key resistance just ahead. The 175-175.35 area is key and we can expect sellers here. In the daily chart, we can see that 175.35 was a previous 2014-high before it was broken in September. We can also see that the Sept-Oct. price action was volatile, having made a new high on the year then falling sharply to 168, which cleared multi-month lows. This has an “exhaustion” implication, and so we should look for signs of topping. If price can hold below 175.35, it would be one of them. Maybe we should give it some elbow space to 176.00. If the daily RSI can turn around before breaking 60, and price can hold below 176, preferably below 175.35, then we should start considering the topping scenario, which calls for a medium-term sideways, bearish outlook.
A break above 176.00 with the daily RSI above 60 however would put the GBP/JPY in a neutral-bullish mode, with the highs around 180.00 back in sight.