GBPJPY is strongly bullish in the short-term after breaking above the key 143.00 level earlier this week. This was a key resistance level which has held since August. The pair reached as high as 148.90 in early European session trading, a level not seen since June 2016.
There is risk that the rally may stall and prices could retreat as there are signs the market has reached overbought conditions since RSI has risen above 70. Meanwhile, MACD has flattened, which also is an indication that upside momentum has fizzled out.
Immediate support is expected at 148.00 as it is seen as a psychological level. A break below this would trigger a move towards the 146.80 – 146.62 area. Failure to rebound from this support zone may add to near-term corrective risks and a push GBPJPY lower towards 144.20 which acted as both support and resistance in the recent past. A move below this would trigger a deeper decline and shift the focus towards the key 140.00 level with scope to see a re-test of the 139.30 low.
The trend higher in GBPJPY remains intact for the short-term and is well-supported by a bullish alignment of trend indicators such as moving averages and Ichimoku cloud analysis. On the 4-hour chart there was a bullish crossover of the 20- and 50-period moving averages, which are both rising. The market is above the cloud while the Tenkan-sen and Kijun-sen lines are positively aligned.
