After the strong downfall in the GBP/JPY pair from the critical resistance level at 156.60, the bulls have finally managed to take control of this pair. The pair found strong support at 140.08 and started is a bullish rally. Majority of the aggressive price action traders managed to execute long orders after the formation of the bullish morning star pattern in the daily chart. On the contrary, the conservative traders went long in this pair after it breaks the nearest resistance level at 145.57. Currently, the price is testing a major resistance level at 149.29 and we need a strong catalyst to overcome this barrier. As expected, the trending movement of this pair is now at a halt and the range traders are making a decent profit by executing short orders at the major horizontal resistance level at 149.29
GBP/JPY Technicals
Figure: GBP/JPY testing major resistance level in the daily chart
From the above figure, you can clearly see the bulls are running out of steam causing a ranging market. If the pair breaks above the current resistance level, we will see another strong bullish rally. On the contrary, a break below the minor support level at 147.20 will result in a sharp fall. This will might result in another retest of the horizontal support level at 140.08. According to the leading analyst of the reputed Forex broker, trading the GBP/JPY pair at the current price is extremely risky since the market sentiment is not all clear.
A daily closing of the price above the major resistance level at 149.29 will eventually lead this pair towards the next major resistance level at 153.799. This level is going to provide moderate resistance and a clear break of this level will lead this pair toward the high of 2nd February 2018. This level is very crucial for long-term investors. Any bearish price action signal will be an excellent opportunity to execute fresh long in favor of the long-term bearish trend. On the contrary, a clear break of the price above the high of 2nd February 2018 will confirm the establishment of the temporary bottom formation near the major support level at 140.08.
On the downside, you the pair needs to clear the current minor support level at 147.20 to create fresh selling momentum in the global market. A daily closing of the price below the minor support level at 147.20 will eventually lead this pair towards 140.08. If the bears manage to clear out this major resistance level, the GBP/JPY bulls will in great trouble. The next ultimate stop for this pair lies at 135.30. This level is going to provide strong support to the GBP/JPY bulls as we have plenty of supportive candles just below this level. However, a clear break of this level will target the low of 2nd October 2016.
Fundamental Factors
Fundamentally the recent performance of the British economy is relatively well then the low-yielding Japanese Yen. This strongly argues against executing short orders in the global market. However, most of the long-term traders will be cautiously waiting for the Average Earnings Index data of the British economy. If the real data beat the forecasted data, we are most likely to experience a bullish breakout in the GBP/JPY pair. On the contrary, the market might extend its ranging movement until a major catalyst helps to break this pattern.
Since we have no high impact scheduled news from the Japanese economy, it’s better to favor the recent positive data of the British economy while trading this pair. However, the long-term traders should wait for a more clear trade setup. Considering the technical and fundamental parameters, the overall bias for the GBP/JPY pair is a little bit bullish at the current moment. So the short term sellers are advised to scale their trade to reduce the risk exposure.