GBP/JPY traded lower on Monday after hitting resistance at 154.45. The rate fell below Friday’s low of 153.90, confirming a forthcoming lower low. Overall, the rate continues to trade below the downside resistance line taken from the high of Jan. 12, while, recently, it accelerated to the downside, distancing itself from that line. All these technical signs paint a negative short-term picture in our view.
We believe that the dip below 153.90 may have opened the way towards the 153.02 level, marked by the low of Dec. 24, the break of which could aim for the 152.60 barrier, or the 152.16 zone, marked by the inside swing high of Dec. 16, and an intraday swing low formed on Dec. 22. If the bears are unwilling to stop there and decide to push lower, we could see them diving towards the low of that day, at around 151.10.
Shifting attention to our short-term oscillators, we see that the RSI lies below 70 but points down, while the MACD runs below both its zero and trigger lines. Both indicators detect strong downside speed and support the notion for further declines.
On the upside, we would like to see a strong rebound back above the 155.40 barrier and the downside resistance line drawn from the high of Jan. 12.
This could encourage the bulls to initially target the high of Jan. 19, at 156.20, the break of which could extend the advance towards the peak of the day before, at around 156.97. If that barrier cannot halt the buying activity either, its break may see scope for extensions towards the peak of Jan. 12, at 157.70.
