Today (2/17), the sterling pound strengthened despite soft headline inflation data (GBP/USD Signals Bullish Continuation Despite Soft Inflation Data). The GBP/JPY ended last week bullish, but was retreating after making a high on the month just above 184. as we can see in the 1H Chart.
Inflation Data Silver Lining: While the headline CPI inflation data was soft, we saw the core reading rise for a second month in a row. Being already in a resilient mode, the GBP was therefore able to brush off the CPI data.
Bullish Breakout: The 1H chart shows that the bullish bias is maintained because GBP/JPY held above the 200-hour SMA and has broken above a flag pattern. After a brief dip, price respected the broken flag as support, and is now extending the breakout
RSI: While the bullish momentum in the 1H chart was shaky before this session, we never saw bearish momentum. Now, the RSI is pushing towards 70, and poised to show bullish momentum.
Scenarios: Looking back at the 1H chart we see a common resistance just under 183.50, and it appears that this resistance is indeed acting up as the 2/17 session winds down. Now if there is a pullback, a bullish market should hold the pair above 182.50, forgiving a brief violation. We can see that there is a support/resistance area around 182.50. A break below 182.00 would then signal further bearish correction. Otherwise, price looks poised to test the highs around 184.
Looking at the daily chart, we can see that after a bearish correction in December through January, bulls are in control of this market. Price held above the 200-day SMA, and the 61.8% retracement. It has now moved above the 100-, and 50-day SMAs, reviving a bullish bias.
Indeed, the 184 area is important. A break above this resistance will also clear a falling speedline from the 2014-high of 189.70, which would expose the 188 highs, as well as the 189.70 high.
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