Rallies to fresh session tops, retakes 155.00 mark and beyond

  • GBP/JPY attracted some dip-buying near two-week-old descending channel support.
  • The mentioned channel constitutes the formation of a bullish continuation flag pattern.
  • The technical set-up favours bullish traders and supports prospects for further gains.

The GBP/JPY cross rallied nearly 70 pips from the early European session lows and refreshed daily tops in the last hour. Bulls are now looking to build on the momentum further beyond the key 155.00 psychological mark.

The strong intraday move up was sponsored by a combination of supporting factors. The underlying bullish sentiment in the financial markets continued undermining demand for the safe-haven Japanese yen. On the other hand, the emergence of some selling around the US dollar extended some support to the British pound.

From a technical perspective, the GBP/JPY cross attracted some dip-buying near a support marked by the lower end of a two-week-old downward sloping channel. Given the recent move up from April monthly swing lows near the 149.00 mark, the mentioned channel constitutes the formation of a bullish continuation flag pattern.

The constructive outlook is reinforced by the fact that technical indicators on the daily chart – though have been losing positive momentum – are still holding comfortably in the bullish territory. This, in turn, supports prospects for the resumption of a strong appreciating move witnessed over the past nine months or so.

That said, it will still be prudent to wait for a sustained break through the trend-channel resistance, currently around the 155.45-50 supply zone, before placing any aggressive bullish bets. The GBP/JPY cross might then surpass the 156.00 mark and aim to challenge February 2018 swing highs resistance near the 156.60 region.

On the flip side, the daily swing lows, around the 154.30 region, coinciding with the trend-channel support, should continue to protect the immediate downside. This is closely followed by the 154.00 round-figure mark, which if broken decisively will negate the positive outlook and prompt some aggressive technical selling.

Some follow-through selling below the 153.70 horizontal support will reaffirm the bearish breakdown and turn the GBP/JPY cross vulnerable. Bearish traders might then drag the cross further towards the 153.00 round-figure mark. The downward trajectory could further get extended towards the 152.25 strong horizontal resistance breakpoint.

GBP/JPY 4-hour chart

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Technical levels to watch

 

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