GBP/JPY is known for its volatility, so that’s why it’s one of the traders’ favorites, but apart from that, it also respects technical analysis with great accuracy.
Looking at the daily chart, you can see two things: Major support and major resistance. The latter is more important right now as we just bounced from it. We’re talking about the 158 area (green), which stopped buyers in October and January.
It also stopped buyers yesterday, which allowed us to create an upper shadow on the daily candle. The price didn’t create a shooting star, which definitely would prove the bearish point. Nevertheless, as long as the price stays below the green area, the sentiment is negative.
After giving it a second thought, it’s a wild thing to say that the sentiment is negative when close to long-term highs. We are close to a strong resistance. The sentiment is negative in the short-term, as long as we’re below the green area. We have a legitimate chance for a correction, which may last maybe a few days.
In the long-term, the sentiment is still, of course, positive but again, buying just below a crucial resistance is not the most recommended trading practice in the world. The short-term sentiment is rather negative. The price bounced from resistance, and only its breakout will reopen a bullish sentiment for us. As long as we stay below it, sellers have a chance to nibble some profits for themselves.