Bullish BoE Reaction: After the Bank of England statement yesterday, the market bid up the sterling pound across the board. GBP/JPY got a jolt as well, sending it to a key resistance around 180.
Consolidation resistance: The 4H chart shows that after the bullish reaction, GBP/JPY is now holding around 180, around a previous resistance pivot on 1/20.
Trend Shifting: As far as momentum goes, the prevailing bearish momentum from last year into mid-January is gone. Price showed respect of the 100-, and 50-period SMA as support after breaking them as resistance. That was a bullish, slingshot signal.
Now, if price retreats and breaks below 178, the middle of the range, then the bearish outlook could be revived, and pressure will be back towards the 175.75-176 area, with risk of breaker into new lows on the year below that.
If price can hold above 178, this week’s price action has potential of extending higher above 180. There is still resistance through to 181, where we can see the 4H 200-period SMA, and a previous resistance pivot during the 1/7-1/9 period.
When we look at the daily chart, we can see that if price approaches 184, GBP/JPY will be seeing a falling trendline from the 189.70 high back in December, 2014.
Hold Last Bullish Bias: On the daily chart, we can see that price is holding above the 61.8% fibonacci retracement level and the 200-day SMA. This shows that the last strong line of defense for the bullish outlook survived. Also, if we consider the current consolidation to be between roughly 176-180, (400 pips), the bullish projection above 180, could be around 184, the level we mentioned above.
So, as GBP/JPY trades at the crossroad, the technical look in both the daily and the 4H charts favor the bullish breakout towards 184.
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