GBP/JPY vulnerable despite upside correction [Video]
|GBPJPY bounced back into the upward-sloping channel to close with moderate gains following the freefall to a one-month low of 158.54 on Thursday.
The 38.2% Fibonacci retracement of the 172.10-155.34 downleg resumed its resistance role, curtaining the bullish momentum around 161.75. While the price keeps testing that level today, the technical indicators are dampening hopes for a meaningful rally; the MACD is gradually easing below its red signal line; the RSI has inched back below its 50 neutral mark, while the Stochastic oscillator is preparing for a downside reversal.
The 162.75-163.70 area, which encapsulates the resistance trendline drawn from October’s six-year high of 172.10, the 20- and 200-day simple moving averages (SMAs), and the 50% Fibonacci level, could also cease price increases within a short distance. If not, then the bulls could pick up steam towards the channel’s upper boundary seen at 165.60. A decisive close higher could clear the way towards the 61.8% Fibonacci of 166.75 and the 167.00 mark.
Should the 161.75 resistance hold firm, the pair could suffer a bearish channel breakout below 160.80. As a result, the bears could push again towards the 23.6% Fibonacci of 159.30, a break of which is expected to squeeze the price into the 157.45-156.70 region.
In brief, GBPJPY has not entirely allayed downside risks in the short-term picture despite returning to the bullish channel. For that to happen, the pair will need to advance above 163.70.
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