The GBP/JPY has been bullish since mid-April, when it made a low on the year at 174.87. It is now pushing above the 2014-high of 187.71. Let’s follow up on the pair as it continues the uptrend.
The daily chart shows that price has cracked the 2014-high and tagged 190 before stalling during the 5/22 Friday session. There is a bearish divergence in the daily chart, which suggests some short-term bearish correction.
A bullish market should not see price fall below 187. A break below 186 and below the rising trendline from mid-April might neutralize the bullish market and put downward pressure in the short-term back towards the 181 area. Let’s take a close look at the current reaction from 190.
In the 4H chart we can see that price has broken above a recent consolidation range. Note the false break to the downside, which was immediately supported at 186. The false breakdown translated to a bullish breakout, and price is now pulling back after tagging 190. The RSI also held mostly above 40 after it tagged above 70 in previous weeks. This shows maintenance of the bullish momentum.
Price action to the downside so far is indicative of simply a pullback. With the bullish wind on its back, the GBP/JPY should find support at or above the 188 pivot.
Flag Pattern; Breakout Confirmation Scenario:
The 1H chart shows that the current retreat from 190 is in the form of a flag pattern. Again, we can see that 188 is probably a key support level. 188.60 is also a possible resistance turned into support. The 1H RSI should hold above 40 if the pullback is to be within the bullish outlook. Then, a break above 189.50 should signal a bullish continuation breakout in the !H chart, and confirm the bullish breakout seen in the 4H chart .
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