GBP/JPY traded higher today, after it hit support at 132.14. That said, the recovery was stopped near yesterday’s high, at 133.04, and then, the rate retreated somewhat. Overall, GBP/JPY is trading above an upside support line drawn from the low of May 17th, and thus, we would consider the short-term outlook to be positive for now.
That said, in order to get confident on larger advances, we would like to see a decisive break above 133.18, a resistance marked by the highs of May 5th and 11th. Such a move would confirm a forthcoming higher high and may pave the way towards the 134.25 zone, marked by an intraday swing high formed on May 1st. If that zone is also broken, then we may experience extensions towards the high of the day before, at 135.44.
Shifting attention to our short-term momentum studies, we see that the RSI, although it recently exited its above-70 zone, turned up again. However, the MACD, despite lying above both its zero and trigger lines, has flattened recently, raising some concerns over another setback before the next leg north.
The move that would make us change our bullish view is a break below 131.94, defined as a support by the inside swing high of May 21st. This could also place the rate below the aforementioned upside line and may encourage the bears to initially target the 131.40 level, which is Monday’s high. Another break, below 131.40, may extend the slide towards the low of May 22nd, at 130.68.