The range that was forming on GBP/JPY last week started getting smaller in size, with lower swing highs and higher swing lows, eventually forming a triangle pattern. During the European session the pair flirted solely around the resistance of the triangle, and ahead of the US session a 4H bar formed completely outside the boundaries of triangle. Stochastics haven’t reached oversold territory yet, so the pair is making a push towards the resistance levels.
While prices remain below 169.70, the swing high from last week, price will continue to move slowly. Reversals around key resistance levels are possible while sentiment remains mixed and news announcements don’t favor any sides in particular.
Above 169.70, and later above 169.97 – the resistance confluence formed by the 200 simple moving average on the 4H timeframe and the 38.2% fibonacci resistance – sentiment will be bullish, opening the way higher towards 171.34.
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Prepared by Alexandru Z., Chief Technical Strategist at Capital Trust Markets