GBP/JPY Price Analysis: Daily technical setup turns in favor of the bulls
|- GBP/JPY’s rebound to find more legs above this key hurdle.
- The cross spots a bull flag on the daily chart amid bullish RSI.
- Bullish crossover to play out ahead of the Fed and BOE verdicts.
GBP/JPY is snapping its three-day bearish streak, rebounding firmly above 156.00 ahead of the critical Federal Reserve’s (Fed) and Bank of England (BOE) monetary policy decisions.
The latest downtrend in the cross could be attributed to the looming Brexit risks and a broad-based US dollar rebound, as investors reassess the rate hike bets from the major central banks.
Looking ahead, the Fed speculations will continue influencing the pair ahead of the FOMC outcome due later on Wednesday. Ahead of that the US ADP and ISM Services PMI will also offer some fresh trading incentives amid a public holiday in Japan.
Technically, GBP/JPY is hovering within a potential bull flag, carved out from the ongoing corrective pullback after a staggering rally to five-year tops above 158.00.
A sustained break above the falling trendline resistance at 156.54 is needed to confirm the bullish continuation pattern.
Should the upside breakout materialize a rally towards the 160.00 level cannot be ruled. Ahead of that the 21-Daily Moving Average (DMA) at 155.55 could test the offers.
The Relative Strength Index (RSI) has stalled its descent and attempts a bounce above the midline, suggesting that a fresh upswing could be in the offing.
The 50 and 100-DMAs bullish crossover confirmed on Friday also adds credence to the renewed upside in the cross.
GBP/JPY daily chart
On the flip side, acceptance below the falling trendline support at 154.52 could invalidate the bull flag pattern, exposing the downside towards the upward-sloping 50-DMA at 153.03.
The next line of defense is positioned at the horizontal 100-DMA at 152.67.
GBP/JPY additional levels to watch
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