- GBP/JPY’s August rally is losing steam and is at risk of reversing lower.
- It has fallen sharply from the September peak and has broken below a key level.
- Further weakness is required to confirm a bearish reversal.
The GBP/JPY has staged a recovery since the lows of August 5. It has since rallied from a low of 180.09 to a peak of 193.49 reached on September 2.
However, this nearly month-long rally is now showing signs of weakness, indicating that the risk of a downside reversal is growing. If GBP/JPY reverses lower, the bias will shift in favour of lower prices.
GBP/JPY 4-hour chart
The pair has fallen quite sharply from the highs of September 2 and recently broke below a key low located around 190.26.
The Relative Strength Index (RSI) momentum indicator has dropped to 37.77 and shows that the momentum accompanying the sell-off since the peak was strong.
Although these signs suggest that a bearish reversal is developing, they are not enough to be certain. The pair needs to fall further to be more certain. Ideally, it should fall below 189.50 (Aug. 26 low) to confirm that a new downtrend was underway. Such a move would likely follow through to an initial target at 188.24 (Aug. 19 low).
Alternatively, a recovery is still possible given the lack of downside confirmation. A close above 192.00 would strongly indicate that a resumption of the August rally was underway. Such a move would be expected to continue to the highs of 193.49 from September 2.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
