When we look at the daily GBP/JPY chart, we don’t really see a clear trend simply based on price action, though we can still assess this market with a slight bullish bias since the push from 168 to about 190 is still the dominant move since Q4 2014.
The RSI has oscillated between 30 and 70 and back, which reflects lack of directional momentum. However, price has been able to hold above the 200-day SMA, which tells us that the bulls are hanging on in this market.
Last week, price fell to 178.20 and was threatening the rising trendline from October 2014’s low of 168. To start this week, we saw a very small daily candle within the body of Friday’s daily candle. This is known as a Harami (pregnant in Japanese). It is quite descriptive because if you take Friday’s and Monday’s candlesticks together, you see that Monday’s candle is the “stomach”.
The harami shows that the market is respecting the rising trendline and gives the bullish scenario more weight, especially if the Tuesday candle is able to close above Friday’s.
However, if the 3/17 (Tues) candle ends up closing below Monday’s, there is a good chance that the market still wants to test the rising trendline. A break below 177.80-178 area would clear the 200-day SMA as well as the rising trendline, which would first open up a commons support near 176 (from a previous consolidation). Below 175, the 168 low from October will come into play.
From the 4H chart, we can see the bounce off of 178.20 as price is starting the 3/17 session cracking the 180 handle. We should first limit the bullish outlook to the area around 181.50. This represents a previous support area, and is also where the 50-period SMA resides. If the 4H RSI also approaches 60 as price tags 181.50, be prepared for a bearish attempt. If price breaks above 182 however, the bullish outlook will become more favorable. However, we saw in the daily chart that a falling resistance would likely challenge a rally near 183.50. A break above 184 might be needed to liberate GBP/JPY back into a bullish scenario.
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