- GBP / JPY witnessed some new selling on Thursday and fell back near two-week lows.
- The lack of a solid continuation sell warrants some caution for aggressive bears.
The GBP / JPY cross has continued to lose ground during the start of the American session on Thursday and has fallen below the 136.00 level, again near the two-week lows set on Wednesday. However, the bulls have shown some resistance at lower levels and have helped the cross quickly recover around 50 pips from daily lows near the 135.75 region.
As for the technical outlook, the strong rally the previous day of more than 150 pips was difficult to find acceptance above the 200-period SMA on the 4-hour chart. A subsequent rejection drop from the breakout point of the three-week uptrend line support favors bears and points to further weakness.
That said, the lack of a solid continuation sell warrants some caution for aggressive bears. Furthermore, the technical indicators on the daily chart have yet to confirm the bearish bias. This makes it prudent to wait for a drop below the previous day’s lows, around the 135.65 region, before opening new bearish positions.
The GBP / JPY cross could become vulnerable to accelerate the decline even further and challenge the key psychological level of 135.00, at the monthly lows hit on October 2. The downward movement could make the cross vulnerable to breaking below the 134.00 level and falling towards the September daily closing lows around the 133.65 region.
On the other hand, any significant recovery attempts now appear to face stiff resistance near the 136.80-85 region. This is closely followed by the 137.00 level, above which a short hedging move has the potential to lift the GBP / JPY cross towards the 137.80-85 high resistance zone.
GBP / JPY 4-hour chart
Credits: Forex Street