GBP/JPY vulnerable despite upside correction [Video]
![GBP/JPY vulnerable despite upside correction [Video]](https://editorial.fxstreet.com/images/Markets/Currencies/Crosses/GBPJPY/iStock-1151541926_XtraLarge.jpg)
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.
Author
Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics.
