GBP/JPY traded lower on Monday after it hit resistance near the 144.85 area on Friday. That said, the price structure continues to be of higher peaks and higher troughs above the tentative upside support line drawn from the low on January 2, while since the 17th of the month, the rate has been trading above all three of our moving averages. Thus, despite today’s pullback, we would consider the near-term outlook to still be positive.
If the bulls are strong enough to regain control at some point soon, then we may see them aiming for another test near the 144.85 zone. If they manage to drive the battle above that zone this time, then we may experience extensions towards the 145.80 territory, which provided strong resistance from November 22-28. Another move higher, above 145.80, may allow the bulls to target the 146.30 obstacle, defined by the inside swing low of the November 14.
Looking at our short-term oscillators, we see that the RSI topped within its overbought zone and slid back below 70, while the MACD, although positive, has topped as well and just crossed below its trigger line. These indicators detect weakening upside momentum and suggest that the current retreat may continue for a while more before, and if, the bulls decide to take charge again, perhaps for the rate to test the 143.40 support, or the aforementioned upside support line.
In order to start examining whether the bears have gained the upper hand, at least in the short run, we would like to see a clear and decisive dip below 142.75. Such a dip could signal the break below the tentative upside support line and may initially aim for the 142.00 zone. A break below 142.00 could carry more bearish implications, perhaps paving the way for the 140.70 area, marked by the lows of January 21 and 22.
