Technical Analysis – GBP/JPY neutral to bullish in short-term but strong 143-resistance keeps risk to the downside
GBP/JPY is neutral in the short-term after a bounce from the August 24 low of 139.30. The rally stalled just below the key 143.00 level as the market became overextended and RSI reached overbought conditions above 70.
The market is also being capped at 143.00, which is the 50% Fibonacci retracement level of the downleg from 146.80 to 139.30. After approaching this level over two days at the end of August and September 1, GBP/JPY lost momentum and stabilized. The pair is now in a consolidation phase between 141.00 and 143.00.
Looking at the 4-hour chart, the risk is tilted to the downside as prices are now in the Ichimoku cloud. RSI has dipped below 50 and is suggesting there is room for further downside. The bottom of the cloud and 23.6% Fibonacci level at 141.00 are expected to act as support. Failure at this key level would open the way to target 140.00 and see a re-test of the low at 139.30. From here, the market would resume the downtrend that started at the August 3 high of 146.80.
Only a move above 143.00 would ease downside pressure and shift focus to the upside. Then the 61.8% Fibonacci and 144.00 resistance would need to be broken in order to give scope for a move to the 146.80 top and then a move higher towards 148.00.
In the near term, the neutral to bullish bias is intact but the downtrend from 146.80 draws a medium-term bearish picture.