After making a low on the year at 174.87 last week, GBP/JPY has been on a rebound. The 4H chart shows the market rallying after a bullish divergence with the RSI. It stalled around 178 at the end of last week and into this week, but as we get into the Wednesday (4/22) session, price has surged above 179 as is cracking 180 as we enter the US session.
After the GBP/JPY broke above the 100- and 50-period SMA it held above them and treated them like support. This was a bullish signal. Now after crossing over the 200-period SMA, it also bounced off of it as support, furthering the bullish outlook in the short-term. The RSI has tagged 70 and held above 40, even 50, which shows development of bullish momentum.
If there is a pullback, let’s see what happens around 179. A bullish market should hold above 179, forgiving a near-term breach. A break below 178.50 however might invalidate the bullish outlook and keep GBP/JPY pressured towards the 175 handle.
The bullish outlook is so far in the short-term. The medium-term mode since the start of December 2014 when GBP/JPY made a high on the year at 189.71, has been bearish-neutral as we can see in the daily chart.
In the daily chart, we can see that the current rally will be challenged as early as 181. Here we see the 100-day SMA, a support/resistance pivot going back to November 2014, and a falling trendline coming down from the 189.71 high.
We can say that the 181-182 area involves a key resistance cluster and if the GBP/JPY were to break this area, the neutral-bearish mode should turn into a neutral-bullish mode. This scenario would first open up the 185 highs from February-March. Let’s first see what happens in the 181-182 area.
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