GBP/JPY Awaiting Breakout from a Narrow Range

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GBP/JPY Awaiting Breakout from a Narrow Range

GBP/JPY is Still Bullish in the 1H Chart:
After a sharp rally last week from a low around 173.00, GBP/JPY found resistance at 180.70 and retreated at the end of the week. As we begin a new week, price has found support at 177.37, but was unable to revive the uptrend, holding below 178.33, which keeps price below the 50-hour simple moving average (SMA). Still, most signs are still bullish.
1) The 200-, 100-, and 50-hour SMAs are in bullish alignment.
2) The 1H RSI has held above 40 since it broke above 80, showing maintenance of strong bullish momentum from last week.

GBP/JPY 1H Chart 9/23
gbpjpy 1h chart 9/23

(click to enlarge)

Narrow Consolidation; Breakout Scenarios:
Looking at the 1H chart, we can see that a break below the 177.37 low would break break below the 100-hour SMA as well. The next support could be around the 176.00 area, a rising trendline, or down to the 200-hour SMA, which resides around 175.65 at the moment.

A break above 178.33 however revives the bullish outlook, with upside first toward 180.70 in the short-term. It should be noted that 180.70 is the current 2014-high. When we look at the daily chart, we can see that a rally since September’s 169.34 low has signaled bullish continuation, breaking above a consolidation period that started at the beginning of the year, though even in consolidation, the bullish bias was kept.

GBP/JPY Daily Chart 9/23
gbpjpy daily chart 9/23

(click to enlarge)

Bullish Continuation Mode:
When we look at the daily chart, we can see that if price breaks below the 176.00 area and the 200-hour SMA, the GBP/JPY has some more room to fall and it would still be within the bullish outlook. For example, we can expect buyers around the 172.50-173 area, where the 50- and 100-day SMAs reside. A break below 171.70 would clear below the 200-day SMA and introduce a bearish outlook.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.