GBP/JPY traded higher yesterday after it hit support slightly above the psychological zone of 130.00. However, during the Asian morning today, the pair found resistance at 131.45 and retreated. Overall, the rate has been printing lower highs and lower lows below a downside resistance line since April 30th and thus, we would consider the short-term picture to be somewhat negative.
That said, before we start examining the prospect of more declines, we would like to see a decisive break below the psychological zone of 130.00. Such a move may allow the bears to drive the battle towards the inside swing high of March 23rd, at 129.12, which if broken may pave the way towards the 127.35 zone, marked as a support by the low of the same day.
Taking a look at our short-term oscillators, we see that the RSI has topped slightly below 50 and turned down again, but the MACD, although negative, remains above its trigger line. Both indicators detect negative momentum, but the fact that the MACD lies above its trigger adds more credence to our view of waiting for a beak below the 130.00 zone before we get more confident on the downside.
In order to begin assessing whether the bulls have stolen the bears’ weapons, we would like to see a strong move above 131.90. This may also take the rate above the downside resistance line drawn from the high of April 30th and could initially aim for the high of May 11th, near the 133.15 zone. Another break, above 133.15, is likely to carry larger bullish implications, perhaps setting the stage for advances towards the peak of April 30th, at 135.45.
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