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Storm clouds continue to gather: GBP/JPY technical analysis

By Nathan Batchelor

GBP/JPY technical analysis shows that the pair will turn heavily bearish below the 141 level. Traders may use the latest upside correction as a chance to sell the GBP/JPY pair from the more attractive levels

The GBP/JPY recently staged a strong reversal from the just below the 141 level, as the British pound clawed back some of its early week losses and the Japanese yen weakened across the board.

GBP/JPY technical analysis shows that the rebound may only be temporary, as the early week decline has helped to form a bearish head-and-shoulders pattern on the lower time frames.

GBP/JPY medium-term price trend

GBP/JPY analysis shows that the pair has staged an upside technical correction, after bouncing from critical technical support.

A much-needed recovery in the British pound has taken place after Monday’s drubbing on the foreign exchange market.

The Japanese yen has weakened across the board as risk-on trading sentiment returned this week.

The daily time frame depicts that the GBP/JPY pair may be headed towards the 143.10 area, following its recent breakout from a rising price channel.

A bearish rejection from the channel, or a failed retest, could see the GBP/JPY pair sold back towards the 141 level.

It is noteworthy that a move back inside the price channel would be considered extremely bullish, and could lead to a technical test of the 143.80 to 144 area.

GBP/JPY short-term price trend

GBP/JPY technical analysis shows that the pair is testing critical short-term resistance, around the 142 area, following a powerful rebound from the 141 area earlier this week.

The one-hour time frame makes a compelling case as to why the recent rebound may only be temporary, due to the fact that the early week slump in the GBP/JPY pair helped form a bearish head-and-shoulders pattern.

The size of the pattern is around 450 points, which highlights that the GBP/JPY pair could be preparing for its next major down move.

The latest upside correction could help form a final right-hand shoulder to complete the bearish reversal pattern.

Due to the volatile nature of the GBP/JPY, short-term traders may wait for a confirmed break under the 141 support level before they start to increase bearish bets towards this pair.

GBP/JPY technical summary

GBP/JPY analysis indicates that the recent slump in the GBP/JPY pair helped to form a large bearish reversal pattern. Watch out for a strong bearish breakout if price settles back under the 141 support level.

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