GBPJPY formed a steeper bullish tube in mid-June, which is now at risk of a breakdown as the bulls seem to have run out of fuel around a seven-and-a-half year high of almost 184.00.
The tiny candlesticks at the top of the uptrend are witnessing fizzling buying interest and should the pair close clearly below the bullish formation and the 183.50 area today, the decline could eventually extend towards the 20-day exponential moving average (EMA) at 181.20. The support trendline, which connects all the lows from March 24th, and the broken resistance line from January might establish a stronger safety net within the 179.80-178.80 zone. If the sell-off intensifies from there, the door will open for the 50-day EMA and the ascending trendlines coming from April and May, all within the 177.35-176.50 area.
According to the technical signals, the ascent in the market is overdone as the RSI and the stochastics seem to have peaked in the overbought zone. The MACD has also slipped below its red signal line, suggesting a weakening bias.
For the bulls to come back into play, the price will need to pierce through the 184.00 ceiling and re-enter the broken short-term bullish pattern. In that scenario materializes, the uptrend might stretch up to the nearby resistance line at 186.00. An acceleration higher could next stall near the 2014-2015 constraining zone of 189.00-189.50.
In brief, GBPJPY’s uptrend could take a breather in the short-term, especially if the price stays below 183.50. Still, with the pair trading comfortably above its previous high of 175.00, a downside correction could be considered as a “buying the dip” phase.