- GBP/JPY trimmed a part of its intraday gains after the BoE announced its monetary policy decision.
- The recent price move constitutes the formation of a bullish inverted head and shoulders pattern.
- A sustained break below weekly swing lows is needed to offset the near-term constructive outlook.
The GBP/JPY cross maintained its bid tone through the mid-European session, albeit retreated few pips from three-day tops after the Bank of England announced its policy decision.
Looking at the technical picture, the recent price action over the past one month or so constitutes the formation of a bullish inverted head and shoulder pattern on the 4-hour chart. The neckline resistance is pegged just ahead of mid-153.00s, which should act as a key pivotal point for short-term traders.
Meanwhile, technical indicators on the mentioned chart have just started moving into the positive territory and add credence to the constructive setup. That said, oscillators on the daily chart are yet to confirm a bullish bias and warrant caution before positioning for any meaningful upside.
Hence, a sustained break through the neckline resistance is needed to confirm the near-term bullish bias. In the meantime, any subsequent positive move is likely to confront some resistance near the 152.85 horizontal zone ahead of the 153.00 round-figure mark and the key 153.40-45 hurdle.
On the flip side, the 152.00 mark now seems to protect the immediate downside. Any subsequent decline might be seen as a buying opportunity near the 151.70-65 region. This, in turn, should help limit the downside near the weekly swing lows, around the 151.15 area touched on Monday.
Some follow-through weakness below the 151.00 mark might negate the bullish head and shoulders pattern and prompt some aggressive technical selling. The GBP/JPY cross might then turn vulnerable and accelerate the downfall further towards challenging the key 150.00 psychological mark.
GBP/JPY 4-hour chart
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Technical levels to watch
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