GBPJPY’s downtrend might soon be over as a double bottom forex reversal pattern can be seen on its 4-hour time frame. Price made a couple of failed attempts to break below support at the 176.00 level and found resistance around 180.00.
Price has yet to test and break past the neckline at the 180.00 major psychological resistance before confirming the reversal. If that happens, GBPJPY can climb to 184.00 or by roughly 400 pips, which is the same height as the forex reversal chart pattern. Stochastic is moving down from the overbought zone though, indicating that bearish momentum is present.
Forex Reversal Forecast
If the resistance at 180.00 major psychological level keeps gains in check, price could head back to its recent lows at the 176.00 mark and form another bottom. This might still be a valid reversal signal, although it could also indicate sideways movement for the pair.
Earlier this week, the UK printed a 0.5% growth figure for Q4 2014, slower than the estimated 0.6% GDP reading and the previous period’s 0.7% expansion. However, the pound still managed to gain from this release since it allowed the economy to log in its fastest annual pace of growth since 2007.
There are no major reports lined up from both the UK and Japan today, which suggests that there are no event risks for this forex reversal setup. Risk sentiment may play a key role in price action, as the upcoming FOMC decision could spark huge moves across financial markets, especially if they switch biases.
The path of least resistance appears to be to the upside, as the UK economy is faring better compared to Japan. Later this week, Japan will release its core inflation readings and spending data. Weak figures could remind traders that the BOJ might pursue further easing in order to keep the economy afloat.
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