GBP/JPY at the Cusp of Bullish Continuation

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GBP/JPY at the Cusp of Bullish Continuation

Looking at the 4H GBP/JPY chart, we see a market that has been trading sideways after leading into August with a bearish market, However, around mid-August, we saw price action shift. It has broken above the falling trendline coming down from around 174. Price has also broken the lower high and lower lows pattern. The RSI has broken above 60 to show loss of bearish momentum. In the 4H chart, GBP/JPY is at the cusp of bullish reversal.

GBP/JPY 4H Chart 8/27
gbpjpy 4h chart 8/27

(click to enlarge)

Currently, GBP/JPY has established a key pivot at 171.60, which would also be reinforced by a short-term rising trendline seen in the 4H chart. A break below 171.60 might shelve the bullish outlook and return GBP/JPY into a consolidation-bearish mode.

So far this week, price is above that 171.60 pivot, and trading in a mini consolidation roughly between 172.68 and 172.05. A break above 172.70 should be an early signal for a bullish continuation. There will be a challenge at 173 as well. When you look at the daily chart you can see that 173.00 is reinforced by a falling trendline and a 50-day SMA.

GBP/JPY Daily Chart 8/27
gbpjpy daily chart 8/27

(click to enlarge)

The daily chart should remind us that GBP/JPY is bullish despite the almost 2-month long decline. Price is still holding above the 200-day SMA. The RSI although showing loss of bullish momentum, does not show any bearish momentum.

However, if price cannot push above 173, and falls below the 171.60 pivot, we are likely still in the short to medium-term consolidation, which has a slight bearish bias. First the pressure would be on the 170.42 low, then the 159.54 support pivot from May after that. At that point, we can start shifting away from the bullish mode, into a neutral mode.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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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.