- The GBP / JPY cross witnessed a dramatic intraday shift from two-week lows.
- The overnight break below a trend line support warrants a warning for the bulls.
The crossing GBP/JPY It built on its strong intraday recovery move from nearly two-week lows and updated daily highs, around 137.25-30 in the last hour. The cross has now recovered more than 150 pips from the daily lows, and the bulls are now looking to take advantage of momentum beyond the 200-period SMA on the 4-hour chart.
Meanwhile, the technical indicators on the daily chart maintained their bullish bias and have again started to gain positive traction on the hourly charts. The setup supports the prospects for a new short-term appreciation move amid renewed Brexit optimism. It’s worth remembering that the UK will reportedly not abandon Brexit talks right away.
However, the overnight break below the three-week rising trend line favors bearish traders and warrants some caution. Therefore, any subsequent bullish movement is more likely to face strong resistance and remain limited near the 137.80-85 supply zone, or above month-long highs touched on Monday. That said, a sustained move further should pave the way for additional gains.
The GBP / JPY cross could then aim to break above the 138.00 level and test the next big hurdle near the 138.35 region.
On the other hand, any significant pullback below 137.00 could now be seen as a buying opportunity. This, in turn, should help limit the decline near the 136.70 area, approaching the very important 200-day SMA. If the mentioned support levels are not defended, the bias will again favor bearish traders and make the GBP / JPY cross vulnerable.
4 hour chart
Credits: Forex Street