GBPJPY has been trading higher after it bounced off its recent lows. If there are enough buyers in the market, we could see the currency pair rally another 500 pips in the coming trading days.
GBPJPY Outlook
On the weekly time frame, it can be seen that GBPJPY bounced off support at its previous lows at 126.15. This suggests that there may be enough buyers in the market to push the currency pair higher.
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The daily time frame hints that potential resistance is around the 141.00 psychological handle. This price coincides with the previous lows on GBPJPY as well as the falling trend line from connecting the highs of December 13 and February 21.
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Inverse Head and Shoulders on the 4-hour Time Frame
A closer look at the 4-hour time frame also supports this bullish bias on the currency pair. It can be seen that GBPJPY has recently been making higher lows after a series of lower lows. Consequently, an inverse head and shoulders pattern has formed. This is considered as a bullish reversal indicator. Because the currency pair is trading above the neckline resistance, it could suggest that GBPJPY may rally soon.
What could trigger a rally on GBPJPY? There is not much in terms of economic data in the coming week. With this being said, updates regarding the coronavirus pandemic in the UK will dictate the direction on the currency pair. Positive developments on UK Prime Minister Boris Johnson’s health would likely be bullish for the pound.
On the other hand, a strong bearish close below the low of April 3 could mean that the currency pair is no longer making higher lows. This may invalidate the inverse head and shoulders pattern and signal another potential retest of 124.15.More content
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