GBPJPY Technical Analysis – A breakout of the range can lead to a big trade

The BoE surprised with a 50 bps rate hike at the
last meeting given the hot employment and inflation reports. At the next
meeting, the BoE was expected to hike by 50 bps again due to another beat in
the wages data but expectations changed in favour of a 25 bps increase as the
recent UK CPI data
missed expectations across the board.

On the other hand, the BoJ
maintains its dovish stance despite core inflation in Japan being at a
four-decades high. There are very small signs of a possible exit from the
current policy, but the BoJ board members keep on dismissing any change in the
near future. In fact, the BoJ is expected to keep everything unchanged at this
week’s meeting, so any surprise can lead to a big appreciation in the JPY.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that eventually we
got the major pullback into the 179.92 support where we
had also the confluence with the
38.2% Fibonacci retracement level.
The price bounced from the support level but couldn’t extend the rally past the
red 21 moving average as the
sellers leant on it as dynamic resistance to position for a break below the
179.92 support. This eventually led the GBPJPY to get stuck in a range between
the support and the moving average.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
big pullback after the breakout of the rising wedge and now
the rangebound price action between the 179.92 support and the 182.29
resistance. The levels are clear though, and it gives both buyers and sellers
defined trading opportunities. In fact, if the price were to break above the
resistance, we should see the buyers piling in and target a new high. On the
other hand, if the price breaks below the support, the sellers should jump
onboard and extend the selloff into the 175.00 handle.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
sellers might have a short term trading opportunity within the range. In fact,
if the price breaks below the trendline, we
should see the sellers piling in to target the support first, and upon a break
lower, the 175.00 handle. More aggressive buyers though, can lean on the
trendline to position for a breakout to the upside with a better risk to reward

See also the video below:

This article was written by FL Contributors at Source