GBP/JPY Price Analysis: Rallies to three-week tops, eyeing a move beyond 200-DMA

• GBP/JPY witnessed a turnaround from a one-week-old ascending trend-line support.
• The technical set-up favours bullish traders and supports prospects for further gains.

The British pound rallied across the board in reaction to reports that officials in the UK are “increasingly optimistic” about finalizing a trade deal. Financial Times Whitehall correspondent Sebastian Payne tweeted out on Thursday: “Officials with knowledge of the talks say a landing zone on state aid has been identified but fishing is the last sticking point.”

A strong pickup in demand for the sterling assisted the GBP/JP cross to rebound swiftly from the 135.35 region – a support marked by a one-week-old ascending trend-line. The cross rallied around 150 pips from daily lows and turned positive for the seventh straight session, with bulls now looking to build on the momentum further beyond the 136.90-137.00 confluence hurdle.

The mentioned barrier comprises of the very important 200-day SMA and the Fibonacci level of the 142.72-133.05 recent pullback, which if cleared decisively will be seen as a fresh trigger for bullish traders. The GBP/JPY cross might then aim to test the 137.55-60 intermediate resistance before eventually climbing to 50% Fibo. level, around the 138.00 round-figure mark.

Meanwhile, technical indicators on hourly charts have again started gaining positive traction. Adding to this, the fact that oscillators on the daily chart have been recovering from the negative territory. The set-up seems tilted firmly in favour of bullish traders and supports prospects for additional gains amid positive Brexit-related news flow.

On the flip side, the 136.00 mark now becomes immediate strong support to defend and is followed by support near mid-135.00s. The latter coincides with 100-hour SMA and should now act as a key pivotal point for short-term traders.

GBP/JPY 1-hourly chart

Technical levels to watch