- The GBP/JPY cross now seems to have entered a bearish consolidation phase and was seen oscillating between two converging trend-lines, forming a symmetrical triangle on short-term charts.
- Given the recent slump of over 400-pips since last Friday, the triangle constituted towards the formation of a continuation – Pennant chart pattern, marking a consolidation before the next leg down.
Meanwhile, technical indicators on 4-hourly/daily charts are still flashing oversold conditions and might turn out to be the only factor that might hold investors from placing any aggressive bets ahead of the latest BoE monetary policy update on Thursday.
However, a convincing break through the triangle support, leading to a subsequent weakness below multi-month lows – around the 131.60 region, will reaffirm the bearish set-up and turn the cross vulnerable to extend its recent downward trajectory.
Below the mentioned support, coinciding with early-January swing lows, the cross is likely to accelerate the slide towards challenging the 131.00 handle before eventually dropping to 1.3065 intermediate support en-route the key 130.00 psychological mark.
On the flip side, any attempted recovery beyond the triangle resistance – currently around the 132.15-20 region, might confront some fresh supply near the 132.80-85 region and seems more likely to remain capped by the 133.00 round figure mark.
GBP/JPY 1-hourly chart
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