GBP/JPY traded higher during the European morning Monday, breaking above the resistance (now turned into support) barrier of 148.50. However, following the break, the rate has been moving in a consolidative manner, between that level and the 149.25 resistance hurdle. On the 8th of May, GBP/JPY rebounded from a long-term upside support line, drawn from the low of the 17th of April 2017, and although it tumbled after the BoE meeting last Thursday, it managed to recover almost all the losses in the following days. The pair now seems to respect a new short-term upside line, which combined with the rebound from the aforementioned long-term line suggest that there is scope for some further recovery.
If the bulls manage to take the reins from current levels, then we would expect them to challenge the 149.25 resistance obstacle soon. A decisive break above that barrier could set the stage for more upside extensions, perhaps towards the psychological round figure of 150.00.
Taking a look at our short-term oscillators though, we see that the RSI stands above 50, but has topped and is now pointing down. The MACD, although above both its zero and trigger lines, shows signs of slowing down. It could top as well. Based on these momentum signs, we stay mindful that another corrective setback may be looming before the bulls decide to shoot again, perhaps for a test near the 148.50 level, or the short-term upside support line taken from the low of the 8th of May.
Nevertheless, even if this is the case, we would consider the near-term outlook to stay somewhat positive. We would like to see a clear dip below that line before we assume that the bears have taken the driver’s seat, at least in the short run. Such a move could initially pave the way towards our next support zone of 147.90.
Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers.