GBP/JPY is currently undergoing a corrective phase within a short-term downtrend. The likelihood of a continuation lower remains high once the correction process is complete. The currency pair has retraced back to resistance at 186.51 after hitting new lows. The successive lower highs and lower lows observed since the peak on September 2 indicate that GBP/JPY is in a short-term downtrend.
Technical analysis principles suggest that following the trend is the best course of action. Therefore, the expectation is for GBP/JPY to exhibit further weakness in the near future. The current pullback is expected to lose momentum soon, leading to a resumption of the downtrend. A breach below the September 11 low of 183.72 would confirm a new lower low, with the next bearish target at 182.82 (the low from August 6) followed by 180.06, which was the low on August 5.
The Relative Strength Index (RSI) indicator is showing bullish convergence with the price action. On September 4, the RSI entered oversold territory when the price bottomed out. However, on September 12, despite the price being lower, the RSI is actually higher. This divergence suggests a slightly bullish outlook for the GBP/JPY pair. This technical analysis data indicates a potential reversal or a pause in the current downtrend.
Despite the counter-trend reaction seen in GBP/JPY, the overall trend remains bearish based on the descending sequence of peaks and troughs. The corrective phase is likely to be short-lived, and once the correction completes, a resumption of the downtrend is expected. An extension lower towards key support levels such as 182.82 and 180.06 is anticipated. The RSI indicator’s bullish divergence provides a glimmer of hope for a potential reversal, but the overall bias remains tilted towards further weakness in GBP/JPY.
In conclusion, GBP/JPY is currently in a corrective phase within a short-term downtrend. The currency pair is expected to resume its downward trajectory once the correction completes. The bearish bias is supported by the descending sequence of peaks and troughs, indicating further weakness in GBP/JPY. While the RSI indicator shows bullish convergence, the overall outlook suggests that GBP/JPY is likely to move lower towards key support levels. Traders should closely monitor price action for a potential confirmation of the bearish trend continuation in GBP/JPY.
