GBP/JPY had a choppy downtrend in May, falling from 173.46 to 169.53 as you can see in the 4H chart.
Since finding support at 159.53, traders started this week buying up pound-yen to just above 171.50 before stalling. As we start the 6/3 Asian session, GBP/JPY is testing a falling trendline that comes down from the 173.46 May-high.
If the market can hold above 171 and push above the 171.95-172 high from last week, then we would have a bullish signal that opens up the 172.75 and 173.46 highs.
However, failure to push above 172 with a dip below 171 keeps May’s bearish trend in place, at least with focus to the 169.54 low.
The daily chart shows that the GBP/JPY has been trading sideways through 2014. From a technical perspective there is bullish bias because of the prevailing uptrend. The RSI has been holding above 40, and reflects the fact that bullish momentum is maintained.
The falling trendline in the 4H chart is a flag pattern resistance from the daily time-frame. A break above 172 has a more significant bullish implication then a dip below 171.
A break below 169.50 however does open up the March lows around 168.00. We should keep our bearish outlook more conservative. While the upside seems limited in the short-term as well, I think if you abide by the “follow the trend” rule of thumb, you take more chances with the bullish outlook since there hasn’t been any strong technical evidence to suggest the bullish trend has ended.
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