Technical Sentiment: Bullish
Key Takeaways
- U.K. Unemployment drops to 6.9%, giving the British Pound a massive boost;
- The resistance of the triangle formation is up next, at 172.80 – 173.12.
The British Pound received a larger than expected boost as U.K. unemployment fell to 6.9% for December 2013 – February 2014, 0.3% less than the general forecast. With GBP/JPY still in a large triangle formation and with the range getting smaller each day, a test of the resistance trendline appears to be the most plausible scenario. A bullish break-out above 173 is the second most plausible outcome.
Bullish continuation is favored
Each time GBP/JPY drifted below 170.50 this week, all the attention was focused on the support levels. While the trendline marking the 170.00 handle and the support of the triangle was not respected to the pip, the pair found support 50 pips lower on the price pivot zone from March. After a perfect double bottom ending with a bullish Pin bar on the Daily chart, the unemployment data was the perfect catalyst to catapult the pair higher.
An intermediary pivot zone formed earlier this month – priced at 171.60 – has already been invalidated, clearing the way towards the main resistance zone from 172.80 to 173.12.
If GBP/JPY will bounce off the triangle resistance at 172.80, we can expect a pull-back in search for yet another higher low. However, the main interest should be top set in April at 173.12. Buyers will be seeking to establish a higher swing high, opening the way towards January 2nd top at 174.82.
If they fail to establish a higher swing high above 173.12, the range-like movements will continue for a few more days. Current support levels are: 171.60; 170.50; 169.50. In order to maintain the bullish technical bias, profit taking or a correction on Wednesday’s rally should not go below the 170.50 level.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
