GBP/JPY Fast Approaching 20-DMA Near 157.00 Level
Extending its smart recovery from sub-155.00 level on Monday, the GBP/JPY pair on Tuesday moved back above 10-day SMA and is now inching closer to 157.00 handle.
The pair's up-move on Monday could be attributed to comments from Japan’s finance minister Taro Aso that the ministry was preparing to intervene in the Forex market should the Yen starts appreciating again and if exchange rate volatility remains at an elevated level. The recent appreciation the Japanese currency has been a cause of concern for the Japanese policy makers as a stronger domestic currency makes country's exports less competitive.
The pair has repeatedly managed to attract fresh bids on its recent dips below 155.00 handle, clearly suggesting that the pair bears might be losing grip and the pair might extend its near-term recovery trend. Moreover, the pair continues to indicate a possible bullish reversal, inverted head & shoulders, pattern formation on daily charts with 154.50 as shoulder support. However, the pattern would be confirmed only once the pair breaks-out of the neck-line resistance, which is still a milestone away from current levels.
On short-term charts, the pair is fast approaching 20-day SMA resistance near 157.00 handle, which if conquered opens room for further near-term recovery for the pair.
Technical levels to watch
Above 20-day SMA (157.00 level), the pair could immediately head toward 157.70-75 horizontal resistance, which if cleared should be aiming for resistance beyond 158.00 round figure mark, near 158.60-65 zone.
On the downside, day's through near 156.00 level seems to protect immediate downside. Failure to hold its immediate support could drag it back towards the very important 155.00 handle support. A decisive weakness back below 155.00 handle might negate expectations of any further recovery, turning it vulnerable to further downside in the near-term.