- GBP/JPY witnessed some fresh selling on Thursday and dropped back closer to two-week lows.
- The lack of any strong follow-through selling warrants some caution for aggressive bearish traders.
The GBP/JPY cross continued losing ground through the early North American session and slipped below the 136.00 mark, back closer to two-week lows set on Wednesday. Bulls, however, showed some resilience at lower levels and assisted the cross to quickly recover around 50 pips from the daily swing lows near the 135.75 region.
Looking at the technical picture, the overnight strong intraday rally of over 150 pips struggled to find acceptance above the 200-period on the 4-hourly chart. A subsequent rejection slide from three-week-old ascending trend-line support breakpoint favours bearish traders and points to additional weakness.
That said, the lack of any strong follow-through selling warrants some caution for aggressive bearish traders. Moreover, technical indicators on the daily chart are yet to confirm the bearish bias. This makes it prudent to wait for a slide below the overnight swing lows, around the 135.65 region, before placing fresh bearish bets.
The GBP/JPY cross might then turn vulnerable to accelerate the fall further towards challenging the key 135.00 psychological mark, or monthly swing lows touched on October 2. The downward trajectory might then turn the cross vulnerable to break below the 134.00 mark and slide further towards September daily closing lows, around the 133.65 region.
On the flip side, any meaningful recovery attempt now seems to confront stiff resistance near the 136.80-85 region. This is closely followed by the 137.00 mark, above which a bout of a short-covering move has the potential to lift the GBP/JPY cross back towards the 137.80-85 heavy supply zone.
GBP/JPY 4-hourly chart
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Technical levels to watch
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