GBP/JPY started the week respecting the 176.12 low from last week and rallied back to about 177.70 before seeing some resistance. Looking at the 4H chart, we can see that this was a bounce off of a descending triangle support.
Secular JPY Bears vs. Corrective JPY Bulls
This bounce looks tempting especially with the JPY in a secular bear market. But in the short-term, the JPY has been taking back its losses since December. GBP was one of the victims as GBP/JPY slid from 189.71. In the daily chart you can see that GBP/JPY has landed at the crossroads between the prevailing secular bull market, and the short and medium-term bearish (correction) market. Note that in the daily chart, GBP/JPY is consolidating just above the 200-day SMA support, as if to say, let me take a breather and figure out where I want to go from this crossroad.
In the daily chart we can also see that price was testing the 61.8% fibonacci retracement level, which likely also contributed to the reason the 175.77-176 area has been able to take the gas out of the GBP/JPY. The 180-181 area has some resistance factors, so if the current rebound does extend higher, we should expect some selling from the 180-181 area – assuming it makes it there.
But wait, what if it doesn’t.
The 1H chart shows that there should be some resistance around 178. This level represents a previous support area from last week, and the middle of the 200-, 100-, and 50-hour simple moving averages cluster. The 1H RSI has also tagged below 30 and is now stalling after pulling back to 60. If it stays below 60, it would reflect development of bearish momentum in the short-term.
In that bearish scenario, the pressure will be back to the 175.77-176 area. A break below this area should trigger some further bearish outlook because as I mentioned before, this is a key support – like a huge dam (in the short-term; breaking above 181 might open up an even bigger flood of secular GBP/JPY-bulls).
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