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  • GBP/JPY created a Doji candle on Monday, neutralizing the immediate bearish setup. 
  • A close above Monday’s high is needed to confirm a bullish reversal. 

GBP/JPY is now trading unchanged on the day at 135.80, having hit a low of 135.42 early Tuesday. 

The pair looks to have trimmed losses, tracking the 0.10% rise in the S&P 500 futures. The upbeat China Retail Sales and Industrial Production figures may have weakened the bid tone around the anti-risk Japanese yen. 

From a technical analysis perspective, Monday’s Doji candle, which represents indecision, has neutralized the immediate bearish bias and made Tuesday’s close pivotal. 

A bullish reversal would be confirmed if the pair ends Tuesday above Monday’s high of 136.59. That would open the doors for a re-test of 138.25 (Aug. 21 low). 

On the other hand, a close below Monday’s low of 135.44 would confirm a bearish Doji continuation pattern. In other words, it would signal a resumption of the sell-off from the Sept. 1 high of 142.71 and expose the July 14 low of 133.98. 

Daily chart

Trend: Neutral

Technical levels