GBPJPY bulls likely to keep control; descending trendline in focus

GBPJPY is surrounded by positive vibes on the daily chart, increasing optimism that there is more room for improvement in the market.

The bulls geared up to seven-month highs and further above the upward-sloping 20-day simple moving average (SMA) after the price hit support around the upper surface of the narrow bullish rectangle.

Oscillators are also holding a bullish flag as the MACD is resuming positive momentum above its red signal line, while the RSI is pointing upwards and has yet to reach its 70 overbought mark at a time when the Stochastics are reversing south again to break above 80 – a sign that there is some extra bullish action in store in the short-term.

The pair could extend recovery but the long-term descending trendline that joins the highs since February 2018 and is close to the former 143.70 support level could come in strong defense. Clearing that block, buying interest could increase towards the 146.50 barrier, while further up the spotlight would shift to the 148.86-149.47 key resistance area.

Alternatively, a downside reversal is expected to retest the upper surface of the rectangle which coincides with the 61.8% Fibonacci of 140.70 the downleg from 149.47 to 126.53. Falling below the rectangle and the 139.40 support region, the door would open for the 50% Fibonacci of 138.00, where any violation could strengthen selling towards the 136.50-135.50 zone.

Meanwhile in the medium-term window, a decisive close below 135.50 would put the market back into a neutral path. Yet, the recent golden cross of the 50-day SMA with the 200-day SMA signals that the positive outlook may stay in place as long as the lines remain negatively aligned.

Summarizing, GBPJPY is likely to hold bullish both in the short- and medium-term timeframe.