GBPJPY has been stuck in a prolonged uptrend since the beginning of the year, generating a structure of consecutive multi-year highs. In the near-term, the price managed to jump above the restrictive trendline that held strong since January, triggering a strong advance towards a fresh 7½-year peak in today’s session.
The momentum indicators currently suggest that the recent rally could be overstretched as both the RSI and the MACD histogram are strengthening well within their overbought territories, while the price is trading above the upper Bollinger band in the last few sessions. Hence, a potential downside correction may be on the cards.
Should buying pressures persist, the pair could extend its uptrend towards fresh multi-year highs, where the October 2015 support of 181.82 could cap its upside. Slicing through that wall, the price could ascend towards the March 2015 peak of 185.00. If that barrier fails, the bulls might then target the November 2015 high of 188.79.
Alternatively, if the positive momentum wanes and the price reverses lower, the 176.47 hurdle could act as the first line of defence. Further declines could then cease at 172.60 before the June support of 171.20 comes under examination. A dive beneath that zone could open the door for the 167.82 support.
In brief, GBPJPY has adopted a bullish short-term pattern, posting consecutive multi-year highs in the past two weeks. However, a downside correction should not be ruled out as the price has approached overbought conditions.