GBP/JPY could be tired from its climb, as a classic reversal formation is brewing on its 4-hour time frame.
Can it break below the neckline from here?
Or will we see a bounce off the key support area?
GBP/JPY 4-hour Forex Chart by TradingView
Guppy has been on an uptrend since mid-April, buoyed by more favorable trade conditions for the U.K. economy and a bit of risk-taking in the markets.
However, the rally seems to be running out of steam, as global trade tensions are flaring once again and boosting demand for the safe-haven yen.
Can GBP/JPY break below the double top neckline next?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the British pound and the Japanese yen, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
The pair still has a bit of room to go before testing the support at the pivot point level (193.04) while the 100 SMA dynamic inflection point, which is above the 200 SMA to reflect bullish vibes, appears to be holding as a floor for the time being.
If buyers defend the 193.00 major psychological mark, look out for a bounce back to the May highs near R3 (196.50) or at least until the area of interest around R1 (194.18).
On the other hand, long red candlesticks piercing through the double top neckline could confirm that a selloff of the same height as the pattern is in the cards. In this case, watch out for a sustained move to the next bearish targets at S1 (191.86) near the 200 SMA then at S2 (190.71) and S3 (189.54).
Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment!
Disclaimer:
Please be aware that the technical analysis content provided herein is for informational and educational purposes only. It should not be construed as trading advice or a suggestion of any specific directional bias. Technical analysis is just one aspect of a comprehensive trading strategy. The technical setups discussed are intended to highlight potential areas of interest that other traders may be observing. Ultimately, all trading decisions, risk management strategies, and their resulting outcomes are the sole responsibility of each individual trader. Please trade responsibly.
