GBP/JPY Price Analysis: Bullish continuation flag pattern spotted on short-term charts

• GBP/JPY witnessed some selling for the third consecutive session on Tuesday.
• A bullish flag pattern supports prospects for the emergence of some dip-buying.
• Positive oscillations further add credence to the near-term constructive outlook.

The GBP/JPY cross struggled to capitalize on the previous day’s bounce from one-and-half-week lows, instead met with some fresh supply near the key 155.00 psychological mark. This marked the third consecutive day of a negative move and dragged the cross back closer to near two-week lows touched in the previous session.

Looking at the technical picture, the recent pullback from the 156.00 mark, or the highest level since February 2018 has been along a downward sloping channel. Given a strong rally from YTD lows (sub-135.00 levels), the mentioned channel seemed to constitute the formation of a bullish continuation flag chart pattern.

The constructive set-up is reinforced by the fact that technical indicators on the daily chart – though have been retreating – are still holding in the bullish territory. This, in turn, supports prospects for the emergence of some dip-buying near the trend-channel support, currently pegged near the 154.45-40 area.

However, sustained weakness below might negate the positive outlook and prompt some aggressive technical selling. The GBP/JPY cross might then accelerate the corrective slide towards testing the 154.00 mark before eventually dropping to the next relevant support near the 153.75 region.

On the flip side, the 155.00 mark now seems to have emerged as an immediate hurdle. Some follow-through buying will reaffirm the bullish bias and push the GBP/JPY cross back towards the top boundary of the trend channel. The latter is pegged near the 155.60-65 region, which if cleared will mark a fresh bullish breakout.

Bulls might then aim back to retest multi-year tops, around the 156.00 mark. The momentum could further get extended towards February 2018 swing highs, around the 156.60 region.

GBP/JPY 4-hour chart

Technical levels to watch