GBP/JPY: Bulls and bears battle for control
|- GBP/JPY stabilizes its decline at the bottom of a bullish channel.
- Short-term signals reveal some improvement in sentiment.
- A bullish outlook could emerge above 210.70.
GBP/JPY is set to complete the week on the sidelines, consolidating February’s aggressive decline from 214.99 near a two-month low of 207.22, as Japan’s Prime Minister seeks the right elixir to achieve her pledged stimulative Abenomics-style policy while simultaneously easing the ballooning government debt.
In technical news, the pair appears to be trading near a critical support region, around the 23.6% Fibonacci retracement of the almost one-year-old upleg at 207.73 and at the lower band of a bullish channel. Strikingly, the weekly sideways pattern seems to be taking the shape of an inverse head and shoulders formation on the four-hour chart, with a neckline at 209.55, providing some optimism that the next move in price could be to the upside.
Still, the bar for a positive outlook remains higher, above the 20- and 50-day simple moving averages (SMAs), which are printing a bearish crossover near 210.70. A successful move higher beyond the 211.70 barrier could help the pair reach February’s ceiling around the 18-year high of 214.99.
In the event of a bearish breakout below the trendline zone of 206.60–207.73, selling pressure may accelerate toward the 205.30 constraining zone. Another failure there could trigger a steeper decline toward the 38.2% Fibonacci retracement at 203.25 and closer to the 200-day SMA, currently at 202.45.
Overall, GBP/JPY appears to be standing at a pivot point. While there are some bullish signals in the market, the pair must rebound above 210.70 to attract fresh buying interest.
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