- GBP / JPY witnessed some selling for the third consecutive session on Tuesday.
- A bullish pennant pattern supports the prospects for some buying on the dips.
- Positive swings add credibility to constructive short-term prospects.
The crossing GBP/JPY It struggled to capitalize on the previous day’s rebound from the week-and-a-half lows, instead finding a fresh offer near the psychological level of 155.00. This marked the third day in a row of a negative move and dragged the cross towards the nearly two-week lows touched in the previous session.
Looking at the technical picture, the recent pullback from 156.00, or the highest level since February 2018, has occurred along a downward sloping channel. Given a strong rally from the yearly lows (levels below 135.00), the aforementioned channel appeared to constitute the formation of a bullish continuation pennant chart pattern.
The constructive setup is bolstered by the fact that the technical indicators on the daily chart, although they have been declining, are still in bullish territory. This, in turn, supports the prospects for some buying to emerge on dips near the trend channel support, currently pegged near the 154.45-40 area.
However, sustained weakness thereafter could negate the positive outlook and lead to some aggressive technical selling. The GBP / JPY cross could accelerate the corrective slide towards the 154.00 test before finally falling to the next relevant support near the 153.75 region.
On the other hand, the 155.00 level now seems to have emerged as an immediate hurdle. Some subsequent purchases will reaffirm the bullish bias and push the GBP / JPY cross towards the upper limit of the trend channel. The latter is pegged near the 155.60-65 region, which if passed will mark a further bullish breakout.
The bulls could then aim to retest the multi-year highs around 156.00. Momentum could extend further towards the February 2018 highs, around the 156.60 region.
4 hour chart
Technical levels
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