GBP/JPY traded higher yesterday, after hitting support at 155.55. However, the recovery was paused near the 157.90 barrier, still well below the downside resistance line taken from the high of April 20th. In our view, this keeps the near-term picture negative.
The recovery could continue above the 157.90 barrier, but we see decent chances for the bears to jump back into the action from near the 159.55 barrier, near the aforementioned downside line. This could result in a new slide back near the 155.55 level, the break of which would confirm a forthcoming lower low and may initially target the 154.70 barrier, marked by the inside swing high of March 15th. If the bears do not stop there, then we may see them pushing towards the low of that day, at around 153.20, where another dip could pave the way towards the low of March 11th, at 151.90.
Looking at our short-term oscillators, we see that the RSI rebounded and exited its below-30 zone, while the MACD, although negative, has turned up as well and poked its nose above its trigger line. Both indicators detect slowing downside speed and support the notion for some further recovery before the next leg south.
Alternatively, the outlook could turn positive upon a break above the 162.20 zone, marked by the high of May 9th. The rate would be well above the downside line drawn from the high of April 20th, and the bulls could initially target the 163.55/85 zone, marked by the highs of May 4th and 2nd, respectively. Another break higher could carry larger bullish implications, perhaps paving the way towards the 166.40 barrier, marked by the inside swing low of April 20th. Slightly higher lie the 167.85 and 168.35 zones, defined as resistances by the highs of April 21st and 20th.
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