Tests key resistance level, but short-term trend bullish

• GBP/JPY has tested a key resistance level and has fallen back.
• Despite the drag, the short-term trend remains positive and could lead to further gains.

GBP/JPY is set to rise for the eighth day in a row on Wednesday. It tested the key peak of September 2 at 193.49 and then fell back, a key resistance level. The short-term trend is bullish despite the block and could continue, pending a decisive breakout.

The 50% Fibonacci retracement level from the July drop at 194.03 could provide further resistance to the bulls.

GBP/JPY Daily Chart

GBP/JPY is in an established short-term uptrend after rallying from the September 11 low. Since it is a tenet of technical analysis that “the trend is your friend”, there is a good chance that this uptrend will continue.

So the pair could simply continue to rise, although it would have to definitively break through the resistance line at 193.49 to confirm such an extension.

A decisive breakout would be one accompanied by a longer than average green candle that closes near its high, or three green candles in a row that break above the level.

However, the medium-term trend is sideways, meaning there is no bias in either direction. The long-term trend, on the other hand, is upward.