GBP/JPY bulls likely to keep control; descending trendline in focus.
GBP/JPY is surrounded by positive vibes on the daily chart, increasing optimism that there is more room for improvement in the market.
The bulls geared up to seven-month highs and further above the upward-sloping 20-day simple moving average (SMA) after the price hit support around the upper surface of the narrow bullish rectangle.
Oscillators are also holding a bullish flag as the MACD is resuming positive momentum above its red signal line, while the RSI is pointing upwards and has yet to reach its 70 overbought level at a time when the Stochastics are reversing south again to break above 80 – a sign that there is some extra bullish action in store in the short-term.
The pair could extend recovery but the long-term descending trendline that joins the highs since February 2018 and is close to the former 143.70 support level could come in a strong defense. Clearing that block, buying interest could increase towards the 146.50 level, while further up the spotlight would shift to the 148.86-149.47 key resistance area.
Alternatively, a downside reversal is expected to retest the upper surface of the rectangle which coincides with the 61.8% Fibonacci of 140.70 the down-leg from 149.47 to 126.53. Falling below the rectangle and the 139.40 support region, the door would open for the 50% Fibonacci of 138.00, where any violation could strengthen selling towards the 136.50-135.50 zone.
Meanwhile, in the medium-term window, a decisive close below 135.50 would put the market back into a neutral path. Yet, the recent golden cross of the 50-day SMA with the 200-day SMA signals that the positive outlook may stay in place as long as the lines remain negatively aligned.
Summarising, GBP/JPY is likely to hold bullish both in the short- and medium-term timeframe.
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