GBP/JPY Pulls Back and Threatens Resistance Around 172-172.20

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GBP/JPY Pulls Back and Threatens Resistance Around 172-172.20

GBP/JPY Signals Bearish Outlook
This week, GBP/JPY started with a bearish gap that pushed price below 170.00, tagging 169.50 and a key support area going back to May and April as we can see in the daily chart. We can also see that price broke below the 200-day simple moving average (SMA).

GBP/JPY Daily Chart 9/10
gbpjpy daily chart 9/9

(click to enlarge)

Bearish Signal:
The bearish attempt opened up the 167.77 support and low from March as well as the 163.87 February and 2014 low. However, price action today shows a resilient GBP/JPY as it rallied back above the 200-day SMA and is around the 172.00 handle as we get into the 9/9 US session.

Testing Key Resistance:
When we look at the 4H chart. we can see that after the week started with a gap down, price has come back to not only fill the gap but extend higher. Now price is testing a converged cluster of 200-, 100-, and 50-period SMAs. Also note that the 61.8% retracement level is around 172.20. One last thing, the 4H RSI is just around 60, and it does not retreat, the bearish momentum from last week will be lost.

GBP/JPY 4H Chart 9/10
gbpjpy 4h chart 9/9

(click to enlarge)

As I complete this post, the GBP/JPY is pushing above the aforementioned resistance factors. Note in the 4H chart a strong tail that pushed price from 171.25 to 172. Now, this tail represents strength for the short-term so if price falls below 171.20, we might lose the currently brewing bullish outlook, and GBP/JPY would be back to neutral.

Now if price can clear above 173.00 as the next step, GBP/JPY would be above the 100-, and 50- day SMAs as well. This would bring up the bullish continuation scenario. At this point GBP/JPY is simply at the crossroad as it trades between the cluster of daily SMAs. We should probably stay away and see how GBP/JPY settles after a few more of these swings.

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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.