- Comments by German Chancellor Merkel, saying that we can find a solution to the backstop by October 31, prompted some aggressive short-covering mover around the British Pound.
- The GBP/JPY cross witnessed a dramatic intraday turnaround and rallied over 200-pips, surging through the key 130.00 psychological mark to hit over three week tops in the last hour.
The strong intraday upsurge lifted the cross towards a resistance marked by the top end of a short-term ascending trend-channel. Given the recent decline, the mentioned channel constituted towards the formation of a bearish continuation – flag chart pattern – and should keep a lid on any subsequent up-move.
Meanwhile, technical indicators on the daily chart have been recovering from the bearish territory and gaining positive traction on the 4-hourly chart. However, oscillators on the 1-hourly chart are already pointing to slightly overbought conditions and might further collaborate towards capping gains.
Hence, it will be prudent to wait for a sustained break through the mentioned barrier before confirming that the cross might have actually bottomed out in the near-term and positioning for any further appreciating move beyond the 131.00 round figure mark towards testing the next major hurdle near the 131.45-50 region.
Alternatively, rejection slide from the current resistance zone and a subsequent slide back below the 130.00 handle might now accelerate the slide back towards an intermediate resistance near the 129.55 region en-route 129.25-20 horizontal support and the 129.00 round figure mark.
GBP/JPY 4-hourly chart
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