GBP/JPY Analysis: Pennant breakdown, flirting with two month rising trendline

The GBP/JPY fell to a one-month low of 146.67 in early Asia, having breached the pennant pattern to the downside on Friday.

At press time, the pair is trading around the trendline sloping upwards from the Aug. 15 low and Sept. 7 low, as seen in the chart below.

Daily chart

The pair created a bearish outside reversal on Friday and closed at 147.48, confirming a downside break of the pennant pattern.

The bearish development indicates the rally from the Sept. 7 low of 142.61 has ended and the bullish view put forward by the upside break of the trendline sloping downwards from February highs has ended.  

The relative strength index (RSI) has turned bearish and the MACD is indicating that downside momentum is gathering pace.

Further, the 5-day and 10-day exponential moving averages produced a negative crossover on Friday and are now sloping downwards in favor of the bears.  

As a result, the pair risks falling to 145.96 - 38.2% Fib retracement of (139.90/149.72) - in the near term, possibly after a re-test of 147.50 as the RSI on the hourly chart is reporting oversold conditions.

The bearish view would be negated only above Friday's high of 149.00.

Resistance

R1: 147.20 (Oct. 2 low)

R2: 147.84 (100-period EMA on 4-hour. The EMA had acted as a strong support last week).

R3: 148.25 (50% Fib R of Feb high/Aug low)

R4: 149.00 (Friday's high)

R5: 149.51 (Oct. 8 high)

Support

S1: 146.54 (50-day EMA)

S2: 145.96 (38.2% Fib R of the ally from August lows)

S3: 145.69 (Aug. 30 high)

S4: 144.81 (50% Fib R of the ally from August lows)

S5: 143.65 (61.8% Fib R of the ally from August lows)