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  • GBP/JPY witnessed a dramatic intraday turnaround from two-week lows.
  • The overnight break below a trend-line support warrants cautions for bulls.

The GBP/JPY cross built on its strong intraday recovery move from near two-week lows and refreshed daily tops, around the 137.25-30 region in the last hour. The cross has now recovered over 150 pips from daily swing lows, with bulls now looking to build on the momentum further beyond the 200-period SMA on the 4-hourly chart.

Meanwhile, technical indicators on the daily chart maintained their bullish bias and have again started gaining positive traction on hourly charts. The set-up supports prospects for further near-term appreciating move amid renewed Brexit optimism. It is worth recalling that the UK reportedly will not walk away from Brexit talks immediately.

However, the overnight break below three-week-old ascending trend-line favours bearish traders and warrant some caution. Hence, any subsequent move up is more likely to confront a stiff resistance and remain capped near the 137.80-85 supply zone, or over one-month tops touched on Monday. That said, a sustained move beyond should pave the way for additional gains.

The GBP/JPY cross might then aim to surpass the 138.00 mark and test the next major hurdle near the 138.35 region.

On the flip side, any meaningful pullback below the 137.00 mark might now be seen as a buying opportunity. This, in turn, should help limit the downside near the 136.70 area, nearing the very important 200-day SMA. Failure to defend the mentioned support levels will shift the bias back in favour of bearish traders and turn the GBP/JPY cross vulnerable.

GBP/JPY 4-hourly chart

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Technical levels to watch